Ashok Kumar Mohapatra, Bhubaneswar V. Principal CIT-1, Bhubaneswar

ITA 9/CTK/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9919 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 30-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Revision of order; Principle of natural justice; Question of law; Prejudicial to interest; Revenue expenditure; Capital expenditure; Set aside; Capital Gains
• Section: 54; 143(3); 54F; 54EC; 22

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI ARUN KHODPIA, AM आयकर अपीऱ सं./ITA No.09/CTK/2022 (नििाारण वषा / AY. :2017-2018) Ashok Kumar Mohapatra, Flat No.5/401, Club Town Apartment, Patia, Bhubaneswar Odisha-751024 Vs Pr.CIT, Bhubaneswar PAN No. : AHAP M 9559 M (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) ननधाारिती की ओर से /Assessee by : Shri C.Parida, AR िाजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR स ु नवाई की तािीख / Date of Hearing : 27/05/2022 घोषणा की तािीख/Date of Pronouncement : 06/07/2022 आदेश / O R D E R Per Arun Khodpia, AM: This is an appeal filed by the assessee against the order passed by the PCIT, Bhubaneswar, dated 12.01.2022, u/s.263 of the Act for the A.Y. 2017-2018, on the following grounds of appeal following grounds:- 1. That, the order passed by the learned Principal Commissioner of Income Tax.Bhubaneswar-1u/s 263 of the I.T. Act, 1961 dated 12.01.2022 is excessive, arbitrary and bad in law. 2. That, the order of the Ld. Principal Commissioner of Income Tax-1, Bhubaneswar passed u/s 263 of the Act setting aside the original assessment made u/s 143(3) to be redone is arbitrary in view of the fact that the original order was neither erroneous nor prejudicial to the interest of revenue. ITA No.09/CTK/2022 2 3. That, the learned Pr. CIT, Bhubaneswar-1 failed to appreciate that the appellant has disclosed fully and truly all the material facts/details/documents necessary for the assessment and that the original assessment was made by the learned Assessing Officer under Section 143(3) of the Act, after due and proper consideration/verification of all the said details/documents relating to exemption claimed u/s 54 of the Act. Hence, the issue of Notice under section 263 of the Act is bad in law being void ab-initio, invalid, beyond the authority of law and devoid of legal force. 4. That, on the facts and in the circumstances of the case and in law, the learned Pr. CIT erred in invoking jurisdiction under Section 263 of the Act, without conducting verification/inquiry by himself and setting aside the assessment order u/s.143(3) of the Act for reviewing and re-examining the facts, details, documents, evidences already examined by the learned Assessing Officer. It is well settled that revision cannot be undertaken for re-examining and directing fresh inquiry due to change of opinion, without making adequate enquiry by the learned Pr. CIT himself. 5. That, on the fact and circumstances of the case and in law, the revisionary proceeding u/s 263 of the I.T. Act, 1961 is bad in law in absence of any new fact, information, corroborative evidence or materials being made available by the Learned Pr. CIT, Bhubaneswar-1, the impugned order u/s 263 of the Act be annulled and quashed. 6. That the appellant may add, alter, delete or modify any of the grounds at the time of hearing of the matter with the leave of the Hon'ble ITAT. 2. Brief facts of the case are that there the assessee is an individual, who derives income from salaries/pensions, long term capital gains and ITA No.09/CTK/2022 3 income from other sources. He filed return of income on 15.06.2017 disclosing total income of Rs.40,74,620/-. Thereafter the AO completed the assessment assessing the total income of the assessee at Rs.40,76,227/- and made addition of Rs.1,607/- on account of earned interest income. 3. Subsequently, the Pr.CIT invoking his powers u/s.263 of the Act, called for the assessment records and found that the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of revenue. Accordingly, the PCIT remitted back the assessment framed by the AO for limited purpose. 4. Now, the assessee is in appeal before the Tribunal. 5. At the outset the Ld AR of the assessee took us to page 11-14 of his paper book showing notice dated 23/08/2018 issued U/s 163 of the Income Tax Act 1961 under Limited Scrutiny (Computer Aided Scrutiny Selection) along with note on e-proceedings. The Ld AO also furnished before us notice for hearing U/s 263 placed on page 1-3 of the paper book, on perusal of the said notice the reason recoded for assumption of powers u/s 263 by the Ld PCIT are that the assessee has not complied with the provisions of section 54 and 54EC while claiming exemption under these sections of The Act under the heat Long Term Capital Gains and certain expenses which were considered as cost of flat are disallowable. Proceedings u/s 263 were conducted and an order was passed on 12/01/2022 by the Ld PCIT considering the original assessment done by the Ld AO as erroneous and prejudicial to the ITA No.09/CTK/2022 4 interest of revenue with a direction to the AO to examine the issue for the limited purpose. 6. Further it is submitted that, Ld PCIT has observed that the AO should have examined when actually the property after completion was handed over to the assessee so as to comply with provisions of section 54 of the Act as for exemption under section 54 the construction should have been completed within a period of 3 years. Findings of the Ld PCIT on this issue are as under:- 6. I have carefully considered the submissions. The judicial precedents cited apply to different fact situations not applicable to Assessee. The statute categorically states that the construction shall be completed within 03 years with a proviso to withdraw the exemption, if the construction is not complete with the stipulated period. The provision of sec.54 reads as under :- Profit on sale of property used for residence. 54. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date [constructed, one residential house in India], then], instead of the capital gain being charged to income- tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or ITA No.09/CTK/2022 5 (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain: [Provided that where the amount of the capital gain does not exceed two crore rupees, the assessee may, at his option, purchase or construct two residential houses in India, and where such option has been exercised,— (a) the provisions of this sub-section shall have effect as if for the words "one residential house in India", the words "two residential houses in India" had been substituted; (b) any reference in this sub-section and sub-section (2)to "new asset" shall be construed as a reference to the two residential houses in India: Provided further that where during any assessment year, the assessee has exercised the option referred to in the first proviso, he shall not be subsequently entitled to exercise the option for the same or any other assessment year.] [(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and ITA No.09/CTK/2022 6 (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Explanation. [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] When at the time of allotment on 20.04.2017, 34 months was the stipulated time for completion, the AO should have examined when actually the property after completion has been handed over to the assessee. The agreement to purchases must be obtained or examined & cross verified with the builder.” 7. To contradict this contention of the revenue the Ld AR of the assessee submitted that if the investment is made by the assesee before filing of the ROI, the same tantamount to purchase as well as construction of new house as stated in the Direct Tax Mannual Volume 3 and also held by various Honourable Courts. AO relied on following case laws:- i) Balraj Vs CIT, 254 ITR 22 (DEL) Held : For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property. Section 54 speaks of purchase. Moreover, the ownership of the property may have different connotations in different statutes. In view of various decisions of the Supreme Court, it was to be held that the Tribunal went wrong in holding that for the purpose of applicability of section 54, registration of document is imperative. Therefore, the assessee was entitled to exemption in terms of section 54. ii) CIT Vs Kapil Nagpal (DEL) – ITA 609/2014/[2015] 63 taxmann.com 366(Delhi), the Hon’ble Delhi High Court has held as under :- IT : Where Assessing Officer rejected assessee's claim for deduction under section 54F on ground that assessee owned more than one residential house property at time of sale of long term capital asset, since assessee was a mere co-owner in one of said residential property, impugned order passed by him deserved to be set aside iii) CIT Vs Santakumari (Kar) – ITA 165/2014, wherein the Hon’ble High Court has held as under :- ITA No.09/CTK/2022 7 Section 54 F is a beneficial provision which promotes for construction of residential house. Such provision has to be construed liberally for achieving the purpose for which it is incorporated in the statute. The intention of the legislature, as could be discerned from the reading of the provision, would clearly indicate that it was to encourage investment in the acquisition of a residential plot and completion of construction of a residential house in the plot so acquired. A bare perusal of the said provision does not even remotely suggest that it intends to convey that such construction should be completed in all respect in three years and /or make it habitable. The essence of said provision is to ensure that assessee who received capital gains would invest same by constructing a residential house and once it is established that consideration so received on transfer of his long term capital asset has invested in constructing a residential house, it would satisfy the ingredients of S. 54F. if the assesee is able to establish that he had invested the entire net consideration within the stipulated period, it would meet the requirement of S. 54F and as such assessee would be entitled to get the benefit of S. 54F of the Act. 8. Regarding Ld PCIT’s finding that AO has not made enquiry or insufficient enquiry the ld AO shown us a query letter dated 06/08/2019 and response of the assessee vide its letter dated 09/09/2019. Ld AO on being satisfied with the response of the assessee has passed an order u/s 143(3) dated 27/09/2019, therefore this case cannot be said to because of no enquiry. 9. Ld AO further submitted that to invoke provisions of section 263 the order must be erroneous and prejudicial to the interest of revenue as the law is discussed by the Honorable Supreme Court in the case of Malabar Industrial Company Limited Vs CIT (243 ITR 83). However, in present case as the original assessment order was neither erroneous nor prejudicial to the interest of revenue hence proceedings initiated and order passed u/s 263 is bad in law, voide ab-initio, beyond the authority of law and devoid of legal force. Also, On the fact and circumstances of the ITA No.09/CTK/2022 8 case in absence of any new facts, information, corroborative evidence or material being made available by the Ld PCIT Bhubaneswar-1 the impugned order under section 263 of the act deserves to be annulled and quashed. 10. On the contrary, Ld CITDR argued the case on behalf of the revenue, stated that query raised by the AO vide his letter dated 06/08/2022 as referred by the AR of the assessee was with reference to Section 54EC of the Act and not on Sec 54F. The assesee also has given a short reply on the same which shall not be considered as satisfactory by the AO. As AO has not conducted any further enquiry on the issue only the response of the assessee has been placed on the record also no finding on the issue was given in the assessment order. Hence this is a case of insufficient enquiry. The same was noted by the Ld PCIT and observed as under: When at the time of allotment on 20.04.2017, 34 months was the stipulated time for completion, the AO should have examined when actually the property after completion has been handed over to the assessee. The agreement to purchases must be obtained or examined & cross verified with the builder.” 11. Ld CITDR further took us to page 59 of the paper book having allotment letter by “Versatile Constructions (P) Ltd dated 20.04.2017, alleging that this is only a letter and shall not be considered as an agreement. CITDR also submitted that the AO was duty bound to get the copy of the agreement which he did not bothered to do so. ITA No.09/CTK/2022 9 12. Further, Ld CITDR took our attention to a para on page 8/10 of the order of Ld PCIT, the same read as : “Further, the address of the assessee is given as flat number 5/ 401, club town apartment, Patia and the house sold on 18.0 2017 for which the capital gain is computed on a sale consideration of Rs. 2 crore is a residential house (Page-5 of the deed) Thus, it is to be examined whether the assessee was in possession of 2 Flats on the date of transfer in which case, he would not be eligible for deduction with effect from 1.4.2001 (see ITO Vo Apsara Bhavanasai ITA 557/HYD/2012 (AY 0809).” 13. From the above para Ld CITDR in support of the observation of the Ld PCIT contended that on the date of sale the assessee has two houses hence exemption U/s 54F shall not be allowed. Also a case law on this issue decided by the coordinate bench of the ITAT Pune in the case of Shetty GD. Vs. ITO W-2(2), Pune in 112 ITD 103(Pune) was quoted, where in exemption U/s 54F is denied to the assessee on the ground that The assessee already owns more than one residential house on the date of transfer of the long term capital assets. 14. Ld CITDR vehemently supported the suggested additions on account of Contribution for Infrastructure Development, Entry fee for owner’s welfare society and maintenance fee for six months for Rs. 2,69,080/- (200000+50000+19080). On this count the PCIT has observed that: As regards entry fee for society & maintenance fee, the same is accepted by the assessee as wrongly made. The AO is directed to make such disallowance, as acceded to. In this connection, the submissions of the assessee are as follows : ITA No.09/CTK/2022 10 “The assessee is however advised that there may be merit in the objection to the inclusion of Rs.50,000 towards entry fee for Owners’ Welfare Society and Rs.19,080 towards six months’ maintenance. Necessary directions may be issued with regard to the sum of Rs.69,080.” In sum, the AO may look into all the above aspects as raised in the notice & as discussed supra. He may verify whether he is eligible for Capital gains expenditure/deduction also, if so eligible, verify the computation of capital Gains as furnished by him. As regards other issues raised in the notice, he may also examine the other issues as discussed supra. 15. CITDR relied on following judgments: i) Jeevan Investment & Finance (P) Ltd.,88 Taxman.com 552, wherein the Hon’ble Bombay High Court has held that : Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 1997-98 - Where while making assessment, Assessing Officer raised query regarding method of valuation of unquoted shares and in response, assessee merely stated that said shares were valued at cost without submitting method of valuing said shares, order of Assessing Officer accepting loss on sale of said shares without making further enquiry was erroneous and prejudicial to interest of revenue [In favour of revenue] ii) Renu Gupta, 301 ITR 45 , wherein in the Hon’ble Rajasthan High Court has held as under :- Held that the Assessing Officer had accepted the submission of the assessee without obtaining the details required and without making inquiry as suggested by him while selecting the case for scrutiny. The assessment was completed in hasty manner without applying his mind and without conducting inquiry and as such the order passed by the Assessing Officer was improper which was held erroneous inasmuch as prejudicial to the interest of the Revenue. Further mere filing of copy of account without supporting evidence would not prove that the expenditure had been incurred for the purpose of business. Therefore, the Commissioner was justified in setting aside the assessment order. iii) Malabar Industrial Co Ltd. Vs CIT 243 ITR 83(SC), the Apex Court Held that :- ITA No.09/CTK/2022 11 There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax.” 16. We have heard the rival contentions, perused material available on records, submissions of both the sides and considered facts of the case in light of the applicable legal position. 17. On factual matrix contentions of the revenue are not acceptable as the assessee has made an investment in new residential property on 20.04.2017 after sale of the existing residential house property on 16.03.2017 i.e. within stipulated time for exemption u/s 54 of the Act. New Flat was purchased from M/s Versatile Constructions (P) Ltd on 20.04.2017 for Rs. 79.81 Lac paid vide 2 cheques numbers 162080 and 162082 (50,00,000 + 29,81,180) dated 20.04.2017 which were cleared from bank also on 24.04.2017 as per copy of allotment letter, money receipt and bank statement submitted in Paper Book by the Assessee page no. 59 to 62. Assessee also invested a sum of Rs. 50 Lac in Capital Bonds allotted on 31.03.2017 exempted u/s 54EC copy of the Bond was placed at page 63 of the paper book. Further, it is evident from the computation submitted by the assessee to revenue authorities and also before the ITAT that Net Capital Gain after these two investments / exemptions was offered for tax by the assessee and the same was ITA No.09/CTK/2022 12 accepted by the AO. Legal preposition on this ground is also in favour of assessee as discussed supra and in the case of CIT Vs. Kapil Nagpal in ITA 609/2014 – Honble Delhi High Court held that : Question (i) 19. Turning to question (i) whether the exemption under Section 54F could be availed of by the Assessee, it requires to be first noticed that in light of the decision of the Supreme Court in CIT v. Podar Cements (P) Limited (supra), CIT v. T.N. Aravinda Reddy (supra) and Balraj v. CIT (2002) 254 ITR 22 (Del), in order to constitute purchase for the purpose of Section 54 and Section 54F of the Act it is not necessary that there should be registered sale deed. This Court in Balraj v. CIT (supra) noticed the decisions in Mysore Minerals Ltd. v. CIT (1999) 239 ITR 775 (SC) and CIT v. R.L. Sood (2000) 245 ITR 727 (Del) and held that "for the purpose of attracting the provisions of Section 54 of the IT Act, it is not necessary that the Assessee should become the owner of the property. Section 54 of the said Act speaks of purchase. 18. The revenue have further alleged that it needs to be examined, if the assessee was in possession of 2 flats on the date of transfer of the property then would not be eligible for deduction w.e.f. 01.04.2001 and quoted case law ITO Vo Apsara Bhavanasai ITA 557/HYD/2012 (AY 0809). We have gone through the said case law and observe that this case law is applicable for exemption u/s 54F and not on section 54 which the assessee has invoked for claiming exemption. Hence, this debate of the revenue which further agitated by the Ld CITDR during the appellate proceedings was without any basis and futile, since has no nexus with the issue involved. 19. Further, In the instant case there is no doubt that enquiry on the limited scrutiny issue was initiated by the AO and duly responded by the assessee, the AO also mentioned in the order that “The Documents as submitted by the assessee were examined and placed on record”, ITA No.09/CTK/2022 13 however no remark on the issue has been made by the AO in assessment order, therefore this shall be considered that the AO was satisfied with the enquiries made. Our considered view on this issue is that, if Pr. CIT/CIT is of the view that any enquiry is necessary in the matter, then he should either himself make such enquiry or may get such enquiry conducted. For the purpose of exercising jurisdiction u/s 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry by Pr. CIT/CIT. If the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry. If the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. 20. In this context decision of Hon'ble Delhi High Court in the case of Director of Income Tax Vs. Jyoti Foundation (2013) 38 Taxmann.com 180, the Hon'ble High court in the said decision has held that: 4. Revisionary power under Section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/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 further scrutiny should be undertaken. In ITO v. D.G. Housing Projects Ltd. [2012] 343 ITR 329/20 taxmann.com 587/[2013] 212 Taxman 132 (Mag.) it has been observed: '11. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of ITA No.09/CTK/2022 14 revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the 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 wrong order has been passed on merits. 12. Delhi High Court in Gee Vee Enterprises v. Additional Commission of Income-Tax, Delhi-I, [1975] 99 ITR 375, has observed as under:— "The reason is obvious. The position and function of the Income-tax Officer is very different from that of a Civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a Civil Court in the absence of any rebuttal. The Civil Court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income- tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 13. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Saraogi v. CIT (1968) 67 ITR 84 and Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:— "These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made ITA No.09/CTK/2022 15 further inquiries before accepting the statements made by the assessee in his return." 14. The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the Assessing Officer had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or verification. These cases have to be distinguished from other cases (i) where there is enquiry but the findings are incorrect/erroneous; and (ii) where there is failure to make proper or full verification or enquiry. 15. In the case of Commissioner of Income-tax v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi), Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held as under:— "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and " inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom.), law on this aspect was discussed in the following manner (page 113): "... From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous insofaras it is ITA No.09/CTK/2022 16 prejudicial to the interests of the Revenue". It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub- section (1). The consideration of the Commissioner as to whether an order is erroneous insofaras it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for 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 have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10)... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re- examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi- judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion...There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed...We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income- tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the ITA No.09/CTK/2022 17 assessee. Such decision of the Income-tax Officer cannot be held to be erroneous" simply because in his order he did not make an elaborate discussion in that regard."" 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded 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 order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable 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 record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer 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 cannot 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. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order ITA No.09/CTK/2022 18 is erroneous and is unsustainable in law. We may notice 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 Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing Products, [1998] 231 ITR 53 (SC)]. 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.' 5. In the present case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited (supra), the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry. 6. In view of the aforesaid legal position, we do not think any substantial question of law arises for consideration. The appeal is dismissed. 21. Decision of Hon'ble Delhi High Court in the case of CIT Vs. Hindustan Marketing and Advertising Company Limited reported in 341 ITR 180 is relevant in this case where the Hon'ble Delhi High Court has held that where the ITO had made reasonable detailed enquiries, had collected relevant material and discussed various facts of case with assessee, order of CIT to direct fresh assessment by going deeper into the matter would not form a valid or legal basis to exercise jurisdiction u/s 263. 22. In view of these judicial pronouncements and on perusal of the fact of the case it is explicitly clear that this case cannot be said to be a case of no enquiry or inadequate enquiry, therefore, proceedings initiated u/s 263 by the Ld PCIT holding the order of AO as erroneous and prejudicial to the interest of revenue are not sustainable, hence quashed. ITA No.09/CTK/2022 19 23. In the result appeal of the assessee is allowed. Order pronounced in the open court on 06/07/2022. Sd/- (C.M.GARG) Sd/- (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 06/07/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीलाथी / The Appellant- Ashok Kumar Mohapatra, Flat No.5/401, Club Town Apartment, Patia, Bhubaneswar Odisha-751024 2. प्रत्यथी / The Respondent- Pr.CIT, Bhubaneswar 3. आयकि आय ु क्त(अऩील) / The CIT(A), 4. आयकि आय ु क्त / CIT 5. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, ITAT, Cuttack 6. गार्ा पाईल / Guard file. सत्यावऩत प्रनत //True Copy//