MMA OFFSHORE ASIA VESSEL OPERATIONS PTE LTD.,SINGAPORE V. CIT (INTERNATIONAL TAXATION)-3, MUMBAI

ITA 2566/MUM/2024

AI Insights

The case involves two appeals by MMA Offshore Asia Vessel Operations PTE Ltd. against the orders of the Commissioner of Income Tax (International Taxation)-3, Mumbai, for the assessment years 2019-20 and 2020-21. The primary issue was the assumption of jurisdiction under section 263 of the Income Tax Act by the CIT, who found the original assessment orders to be erroneous and prejudicial to the interest of the revenue. The Tribunal examined whether the Assessing Officer had conducted adequate inquiries and whether the CIT's intervention was justified. The Tribunal concluded that the Assessing Officer had made specific inquiries and received detailed responses from the assessee, thus setting aside the CIT's orders and restoring the original assessments.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 28592 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 05-11-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 24-05-2024
• Other Referred Cases: ITO vs. DG Housing Projects Ltd., CIT vs. Clix Finance India Pvt. Ltd., CIT vs. Sunbeam Auto Ltd., CIT vs. Anil Kumar Sharma, Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Paville Projects (P) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA; DR
• Assessee Lawyers: NITESH JOSHIPUNIT LOHIYA; ARS
• Keywords: Set aside; Revenue expenditure; Question of law; Capital expenditure; TDS; Deemed to accrue or arise in india; Double taxation relief; Revision of order
• Section: 143(3); 142(1); 195; 263; 44BB

Judgement Text

" | आयकर अपीलीय अिधकरण \fा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI SUNIL KUMAR SINGH, HON’BLE JUDICIAL MEMBER I.T.A. No. 2566/Mum/2024 Assessment Year: 2019-20 & I.T.A. No. 2567/Mum/2024 Assessment Year: 2020-21 MMA Offshore Asia Vessel Operations PTE Ltd. 9 Raffles Place #15-02, Republic Plaza 8, Cross Street Singapore - 048619 [PAN: AACCJ8004E] Vs The Commissioner of Income Tax (International Taxation)-3, Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Nitesh Joshi/Punit Lohiya, A/Rs Revenue by : Shri Vivek Perampurna, D/R सुनवाई की तारीख/Date of Hearing : 05/11/2024 घोषणा की तारीख/Date of Pronouncement : 08/11/2024 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 are two separate appeals by the assessee preferred against two separate orders of the ld. CIT(IT)-3, Mumbai, (hereinafter ‘ld. CIT’) dated 29/03/2024 & 31/03/2024 framed u/s 263 pertaining to AY 2019-20 & 2020-21, respectively. 2. Since the underlying facts in the impugned quarrel are similar, therefore, both these appeals were heard together and are disposed off by this common order for the sake of convenience and brevity. 3. The common grievance in both these appeals relate to the assumption of jurisdiction u/s 263 of the Act by which the ld. CIT treated I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 2 the impugned assessment orders as not only erroneous but also prejudicial to the interest of the revenue. 4. Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules, 1963. 5. At the concession of the representatives, we have heard the appeals for AY 2019-20 and are considering the facts for AY 2019-20 as the facts for AY 2020-21 are mutatis mutandis the same. 6. The assessee filed its return of income on 26/09/2019 declaring total income of Rs. Nil. The return was selected for complete scrutiny through CASS with following reasons:- a) The assessee has claimed substantial refund out of TDS u/s 195. b) The assessee has claimed substantial amount of refund. c) The assessee has claimed large refund claimed out of overall TDS. 6.1. Statutory notices were issued and served upon the assessee and subsequently, after due verification of submissions made by the assessee and documents available, the income of the assessee was assessed at Nil and the exemption claimed as per DTAA amounting to Rs. 33,46,06,627/- was allowed. 7. Since the assessment order only refers to the submissions made by the assessee and documents considered thereon and there being no further discussion of what were the submissions of the assessee and what documents were considered, it would be pertinent to consider the same here. 8. The first notice dated 31/03/2021 was followed by notice u/s 142(1) of the Act dated 07/07/2021 with the following questionnaire:- I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 3 “1. Copy of ROI and certified copies of the following documents along with all its schedules. (i) Computation of total income with notes to accounts attached thereto. (ii) Annual report including Balance sheet, P&L & Audit report, if any. (iii) Form No. 3CEB, if applicable. (iv) Copy of 26AS and reconciliation. 2. Detailed and descriptive note on the nature of activity conducted during your operations in India along with a detailed note on the modus operandi. 3. Submit a detailed note on the nature of income and justify the exemption claimed if any in the return of income. 4. Details along with quantum of all income earned through your operations in India during the year under consideration, whether offered to tax or not. 5. Copy of approval /permission granted by the Reserve Bank of India / SEBI and other regulatory bodies to you to operate in India. 6. Copy of Tax Residency certificate. 7. Submit copy of all the contract agreements and other agreements signed with Indian parties with respect to your operations in India. 8. Reconciliation statement of the income returned with the income corresponding to credit of TDS claimed as per the return of income and in accordance with the AIR. You are also requested to submit copies of all TDS certificates for verification of the claim of credit and 26AS. 9. The complete details of inter-office adjustments showing the gross adjustments and the net adjustments. 10. Any other document on which you may wish to rely in support of Return of Income. 11. Recurring Issues: With reference to the additions/disallowances made in the earlier assessment orders and appeal status, please give details of similar claims liable for disallowances on similar grounds. In case the issues have been decided in your favor at any stage of appeal, relevant details may also be submitted. Please provide copies of the last three (03) assessment orders.” 9. The assessee replied as under:- {This space has been left blank intentionally. P.T.O} I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 4 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 5 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 6 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 7 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 8 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 9 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 10 10. From the above it is crystal clear that specific queries were raised by the AO in respect of nature of income and justification for the claim of exemption. The AO also asked specifically for contract agreements and other agreements signed with the Indian parties with respect to operations in India. 10.1. From the above reply of the assessee exhibited hereinabove, it can be seen that the assessee had given complete details and descriptive note of the nature of activity conducted during the year in India along with a detailed note on the modus operandi. In its reply, the assessee has also given complete details and justification of the exemption claimed in its return of income. It was elaborately explained as to how the provisions of Section I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 11 44BB of the Act would apply and after its application how the income will be exempt, does not come within the purview of Articles 5, 7 or 12 of the India Singapore tax treaty. 10.2. Not satisfied with the submissions of the assessee, the AO issue second notice u/s 142(1) of the Act dated 15/09/2021 raising the following queries:- “As per order us 127 of IT Act passed by CIT(IT)-3, Mumbai, the jurisdiction of the assessee has been transferred to this office for disposal of pending assessment proceeding. 1. Submit the corporate structure with details of parent company(s) its parent company(s) and ultimate group company(s) along with name, address, country of incorporation, % shareholding. 2. Submit the details of income tax paid on the receipts received during the year in Singapore. 3. In respect of MNV Falcon: a) Details of vessel registration along with supporting documentary evidence. b) Your relationship with the vessel, whether owned or chartered along with supporting documentary evidences. If owned, year in which acquired along with cost and mode of acquisition, if chartered, name of owner with country and copy of charter agreement and relationship with owner. As per your submission, vessel \"MNV Falcon\" is time chartered by BG Exploration and Production India Pvt. Ltd. (BGEPIL) for which agreement between assessee and BGEPIL dated 24.09.2018 is submitted. In respect of this agreement, submit the followings: a) Country from where the vessel was dispatched to India under this agreement along with date of dispatch of vessel with supporting document, date of entry of vessel in India along with supporting document. b) Date when the vessel was relieved by the charterer under said agreement along with supporting document c) The scope of work has been defined under said agreement under Para 2 titled \"Scope\" under \"Technical Attachment B\" wherein following items appear under scope of 1. Safety standby duties, operation standby duties 2. Bulk transfer, cargo, personnel transfer and food run, 3. Accommodation for charterer personnel with allied activities 4. Catering services for the crew 5. Communication facilities You are required to submit the specific services provided under each above scope along with supporting documents. You are further required to substantiate as to how said activities are covered under section 44BB of IT Act. Please note that you have submitted in your submission that receipts from said agreement are covered under section 44BB of IT Act therefore you are bound to explain as to how activities performed by you are connected with prospecting for, exploration or production of mineral oils in India. I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 12 Therefore, you are expected to submit all the activities done by you and establish their direct and inextricable connection with activities covered in section 44BB of IT Act. In case you fail to do so, please treat this as show cause for denying the deemed income provision under section 44BB of IT Act. d) As per said agreement, the period of charter of vessel is 195 days with 2 extension of 15 days each and mobilisation window period 23.10.2018 to 07.11.2018. Submit the date of mobilisation of vessel and total period under which vessel was chartered to charterer under said agreement. 5. In respect of Jaya Vigilant: a) Details of vessel registration along with supporting documentary evidence. b) Your relationship with the vessel, whether owned or chartered along with supporting documentary evidences. If owned, year in which acquired along with cost and mode of acquisition, if chartered, name of owner with country and copy of charter agreement and relationship with owner. 6. As per your submission vessel “Jaya Vigilant” is time chartered by J Ray McDermott SA (McDermott) for which agreement between assessee and McDermott dated 01.06.2017 is submitted. In respect of this agreement, submit the followings: a) Country from where the vessel was dispatched to India under this agreement along with date of dispatch of vessel with supporting document, date of entry of vessel in India along with supporting document b) Date when the vessel was relieved by the charterer under said agreement along with supporting document c) The scope of work has been defined under said agreement under Para 37 titled \"Scope of work (SOW)\" wherein following items appear under scope of work to be performed by the charterer: 1. ROV support of pipeline/umbilical pre-commissioning and commissioning activities, 2. Subsea lifts up to 20MT, 3. DP operations for 24 hour operations In Para 38 of said agreement, owner's responsibility for provision of vessel are mentioned. In view of this, you are required to submit the specific services provided under Para 38 of agreement along with supporting documents. You are further required to substantiate as to how said activities are covered under section 44BB of IT Act. Please note that you have Submitted in your submission that receipts from said agreement are covered under section 44BB of IT Act therefore you are bound to explain as to how activities performed by you are connected with prospecting for, exploration or production of mineral oils in India. Therefore, you are expected to submit all the activities done by you and establish their direct and inextricable connection with activities covered in section 44B of IT Act. In case you fail to do so, please treat this as show cause for denying the deemed income provision under As per said agreement, the period of charter of vessel is 60 days. Submit the date of mobilisation of vessel and total period under which vessel was chartered to charterer under said agreement.” 10.3. It can be seen from the above that the AO, referring to the previous reply of the assessee raised further queries which were replied by the I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 13 assessee vide response dated 22/09/2021. The most relevant part of the reply read as under:- I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 14 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 15 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 16 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 17 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 18 11. From the reply of the assessee it can be seen that once again the assessee has explained in detail its claim of exemption. 12. To seek further clarification, the AO issued a third notice u/s 142(1) of the Act dated 17/09/2021, raising following queries:- “In addition to queries raised vide notice u/s 142(1) dated 15.09.2021, you are required to furnish the following details: 1. In respect of chartering of vessels to BGEPIL and McDermott, please submit the followings: a) Copy of charter agreements, b) The specific services provided by you to above two persons along with relevant clauses in charter agreements wherein provision of said services by you is mentioned.” 12.1. To which, the assessee replied as under:- I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 19 12.2. In support of its claim of exemption, the assessee has also submitted the following certificates from the Directorate General of Hydrocarbons, Ministry of Petroleum & Natural Gas, Govt. of India:- I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 20 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 21 13. From a thoughtful consideration of the aforestated queries raised by the AO during the assessment proceedings and the detailed submissions made by the assessee, it is crystal clear that the AO raised specific queries and the assessee gave specific replies, therefore, we do not find any I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 22 justification in assumption of jurisdiction by the ld. CIT u/s 263 of the Act, wherein the ld. CIT setting aside the assessment order held that the assessment order is not only erroneous but also prejudicial to the interest of the revenue. 13.1. The entire case of the ld. CIT revolves around his allegation that the AO has not conducted proper enquiry into the details of the assessee’s operations and has not applied his mind to the details provided by the assessee. 13.2. As explained elsewhere, the AO has made thorough enquiry and after considering the submissions and the documentary evidence took a view that the income of the assessee is not taxable. The view taken by the AO is against the plausible view on the facts of the case as explained elsewhere. Therefore, the allegation of the ld. CIT is not only baseless but also full of surmises and conjectures. 14. Assuming yet not accepting that the AO has not conducted proper enquiries, nothing prevented the ld. CIT to conduct enquiries as held by the Hon’ble High Court of Delhi in the case of ITO vs. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi)(HC). The relevant findings read as under:- “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 I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 23 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. 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 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 vs. Shree Manjunathesware Packing Products, 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. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 24 for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that “order passed by the Assessing Officer may be erroneous”. The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondents computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is “erroneous”. The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 15. It would not be out of place to refer to the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Clix Finance India Pvt. Ltd. ITA 1428/2018 order dated 01.03.2024. The relevant findings read as under:- “19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two- pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order. I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 25 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12.2004 and 06.01.2005. Thus, it is not a case where no enquiry whatsoever has been conducted by the AO with respect to the claims under consideration. However, this whether the mandate of law forKleads us to an ancillary question invoking the powers under Section 263 of the Act includes the cases where either an adequate enquiry has not been made and the same has not been recorded in the order of assessment or the said authority is circumscribed to only consider the cases where no enquiry has been conducted at all. 22. Reliance can be placed on the decision of this Court in the case of CIT v. Sunbeam Auto Ltd. [2009 SCC OnLine Del 4237], wherein, it was held that if the AO has not provided detailed reasons with respect to each and every item of deduction etc. in the assessment order, that by itself would not reflect a non- application of mind by the AO. It was further held that merely inadequacy of enquiry would not confer the power of revision under Section 263 of the Act on the Commissioner. The relevant paragraph of the said decision reads as under:- “17. 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-t axAct. 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 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma [2010 SCC OnLine Del 838], wherein, it was held that once it is inferred from the record of assessment that AO has applied its mind, the proceedings under I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 26 Section 263 of the Act would fall in the category of Commissioner having a different opinion. Paragraph 8 of the said decision reads as under:- “8. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this court. That being the position, the present case would not be one of “lack of inquiry” and, even if the inquiry was termed inadequate, following the decision in Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) (page 180) : “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.” No substantial question of law arises for our consideration.” 24. In Ashish Rajpal as well, this Court was of the view that the fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee. 25. Further, the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., enunciates the meaning and intent of the phrase “prejudicial to the interests of the Revenue”, in the following words:- “8. The phrase “prejudicial to the interests of the Revenue” is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [(1957) 31 ITR 872 (Cal)], the High Court of Karnataka in CIT v. T. Narayana Pai [(1975) 98 ITR 422 (Kant)], the High Court of Bombay in CIT v. Gabriel India Ltd. [(1993) 203 ITR 108(Bom)] and the High Court of Gujarat in CIT v. Minalben S. Parikh [(1995) 215 ITR 81 (Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT [(1987) 163 ITR 129 (Mad)] interpreting “prejudicial to the interests of the Revenue”. The High Court held: “In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 27 might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration.” In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 10. The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax 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 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 unsustainable 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 passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue.(See Rampyari Devi Saraogi v. CIT [(1968) 67 ITR 84 (SC)] and in Tara Devi Aggarwal v. CIT [(1973) 3 SCC 482 : 1973 SCC (Tax) 318 : (1973) 88 ITR 323].)” [Emphasis supplied] 26. Recently, the Hon’ble Supreme Court in the case of CIT v. Paville Projects (P) Ltd. [2023 SCC On Line SC 371], while relying upon Malabar Industrial Co. Ltd., has discussed the sanctity of two- fold conditions for the purpose of invoking jurisdiction under Section 263 of the Act. The relevant paragraph of the said decision reads as under:- “27. Learned counsel appearing on behalf of the assessee has heavily relied upon the decision of this Court in the case of Malabar Industrial Co. Ltd. (supra). It is true that in the said decision and on interpretation of Section 263 of the Income Tax Act, it is observed and held that in order to exercise the jurisdiction under Section 263(1) of the Income tax Act, 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. It is further observed that if one of them is absent, recourse cannot be had to Section 263(1) of the Act. ***” I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 28 16. Considering the facts of the case in totality, we are of the considered view that the AO has made specific enquiries to which the assessee has given specific replies. Therefore, it cannot be said that no enquiry was made by the AO and as held by the Hon'ble High Court of Delhi in the case of Clix Finance India Pvt Ltd [supra], inadequacy of enquiry by the Assessing Officer with respect to certain claim would not in itself be a reason to invoke powers enshrined in section 263 of the Act. 17. We accordingly set aside the order of the ld. CIT u/s 263 of the Act and restore that of the AO dated 29/09/2021 framed u/s 143(3) of the Act. Accordingly, appeal of the assessee in I.T.A. No. 2566/Mum/2024 for AY 2019-20, stands allowed. 18. As mentioned elsewhere, the underlying facts in ITA No. 2567/Mum/2024 for AY 2020-21 are mutatis mutandis the same as considered hereinabove in ITA No. 2566/Mum/2024 for AY 2019-20, for our detailed discussions therein, appeal for AY 2020-21 is allowed. The order of the PCIT dated 31/03/2024 is set aside and that of the AO dated 23/09/2022 framed u/s 143(3) of the Act is restored. 19. In the result, appeals of the assessee are allowed. Order pronounced in the Court on 8th November, 2024 at Mumbai. Sd/- Sd/- (SUNIL KUMAR SINGH) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 08/11/2024 * * * *SC SrPs SC SrPs SC SrPs SC SrPs I.T.A. No. 2566/Mum/2024 & I.T.A. No. 2567/Mum/2024 29 आदेश की \u0014ितिलिप अ\u0019ेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014\u001cथ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "