AI Insights
The case revolves around an appeal by Subhash Jaiswal Associates against the order of the PCIT, Bareilly, which set aside the original assessment order under section 263 of the Income Tax Act. The PCIT's order was based on the grounds that the original assessment was erroneous and prejudicial to the interest of the revenue as it allegedly lacked adequate inquiry into various financial transactions, particularly concerning the liquor business operated by the assessee. The ITAT, however, found that the Assessing Officer had conducted sufficient inquiries during the original assessment, and thus, the PCIT's revisionary order was set aside.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 791797 (ITAT-LUCKNOW)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 7 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-12-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2017-2018
Appeal Filed On
06-05-2022
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW BEFORE SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER AND SHRI SUBHASH MALGURIA, JUDICIAL MEMBER ITA No.100/LKW/2022 (Assessment Year: 2017-18) Subhash Jaiswal Associates 71, Newada Sheikhan, Bareilly, Uttar Pradesh-243001. v. Shri Devinder Singh Kalyan, PCIT, Bareilly, Uttar Pradesh-243001. PAN:AAMAS7252B (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri R. R. N. Shukla, Addl. CIT(DR) O R D E R PER ANADEE NATH MISSHRA, A.M.: (A) Vide ITA. No.100/LKW/2022 appeal has been filed by the assessee against the impugned order dated 21.02.2022 passed by the Ld. Principal Commissioner of Income Tax [“PCIT”, for short], Bareilly for assessment year 2017-18 under section 263 of the Income Tax Act, 1961 (“Act”, for short). The grounds of appeal of the assessee are as under: - “Grounds No.1 The Learned PCIT, Bareilly has erred in initiating and completing the revisionary proceedings u/s 263 of the Act in the hands of the assessee, and setting aside the case to the Assessing officer, with total disregard to the facts and circumstances of the case, and is untenable under the law. Grounds No. 2 The Learned PCIT, Bareilly erred in setting aside the assessment made vide order under section 143(3) dated 15/12/2019 and passing an order under section 263 of the Act on the grounds that the original assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the revenue and directing AO to frame fresh assessment order (de novo) after giving reasonable opportunity of hearing to the appellants. Printed from counselvise.com ITA No. 100/LKW/2022 Page 2 of 37 Grounds No. 3 The Learned PCIT, Bareilly has further failed to appreciate that the original assessment order was passed by the Assessing officer after considering all the issues mentioned in his show cause notice and after making due enquiries, and thus the case was not the one of lack of enquiry by the Assessing officer. Grounds No. 4 The Learned PCIT, Bareilly erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 15/12/2019 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dated 21/02/2022 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. Grounds No. 5 The Learned PCIT, Bareilly further failed to appreciate that where there were two possible views and a logical view had been taken by the Assessing officer in the original assessment proceedings, the revisionary proceedings could not be initiated to substitute his own view. Grounds No. 6 That the finding of Learned PCIT, Bareilly that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable Grounds No. 7 That the Learned PCIT, Bareilly has erred in holding that it is a case of “lack of enquiry\" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act. Grounds No. 8 The Learned PCIT, Bareilly has without conducting any independent enquiries has held the order to be erroneous and prejudicial to the interest of the revenue, has set aside the assessment back to the file of the Assessing officer with total disregard to the facts and circumstances of the case. The CIT has failed to appreciate that powers of revision u/s 263 cannot be exercised for redoing the investigation, rather the CIT ought to have done the investigation himself before restoring the matter to the AO. Grounds No. 9 The Learned PCIT, Bareilly has further ignored that in view of the provisions of explanation 2 of section 263, it is incumbent to point out what more enquiries would the AO ought to have conducted. Grounds No. 10 That the Learned PCIT, Bareilly has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set- aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable. The learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act. Grounds No. 11 That the Learned PCIT, Bareilly has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer - It is therefore prayed that, impugned order dated 21.2.2022 under section 263 of the Act Printed from counselvise.com ITA No. 100/LKW/2022 Page 3 of 37 be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. Grounds No. 12 The assessee’s case does not fall within the mischief of section 263 and as such the order is bad in law and the same is liable to be cancelled. Grounds No. 13 That the Appellant craves leave to amend alters, add or forego any of the above grounds.” (A.1) Subsequently, the assessee also filed additional ground of appeal as under: - (B) In this case, assessment order dated 15.12.2019 was passed u/s 143(3) of the Act whereby the assessee’s total income was determined at Rs.97,61,730/- as against the returned income of Rs.94,78,920/-. The Ld PCIT assumed jurisdiction u/s 263 of the Act by issuing show cause notice to the assessee. Subsequently, the Ld. PCIT passed order dated 21.02.2022 under section 263 of the Act whereby the Ld. PCIT set aside the aforesaid assessment order dated 15.12.2019 with the direction to the Assessing Officer to frame de novo assessment order as per law. The order u/s 263 of the Act includes in its, the aforesaid Printed from counselvise.com ITA No. 100/LKW/2022 Page 4 of 37 show cause notice. The aforesaid order dated 21.02.2022 passed u/s 263 of the Act is reproduced below, for the ease of reference:- “In this regard, a hearing in the matter is fixed on 07/12/2020 at 10:40 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in 2. The case records for the A. Y.2017-18 have been called for and examined by the undersigned. The undersigned considers that the assessment for the A.Y.2017-18, which is completed u/s 143(3) of the Income Tax Act 1961, on 15.12.2019 at total assessed income of Rs. 97,61,730/- is erroneous in so far as it is prejudicial to the interest of the revenue on the following issues :- i. From perusal of records, it is noted that the Assessing officer has not enquired about shop-wise details of purchases, sales and expenses. ii. As per case laws reported in 254 ITR 230 in the case CIT Vs. Rangila Ram and Others, Hon'ble Supreme Court and 408 ITR 402 in the case PCIT v. Chamundi Winery and Distillery, Hon'ble Karnataka High Court have held that the whole income from the liquor business should be taxed in the hands of licencee only and the expenses incurred by other persons should be disallowed. In this case, assessing officer has not asked the assessee to submit the details of licence issued to him for the trading of liquor. iii. The AO has also failed to examine the sales of liquor by assessee with supporting documents such as sales bills/vouchers. Hon'ble Rajasthan High Court in the cases CIT Vs. Ram Singh and Others, 363 ITR 417 and Trilok Chand Girdharilal and Party, 369 ITR 751 has held that non- maintenance of sales vouchers and stock register entails to the rejection of accounts and consequently, estimation of income. The AO has failed to examine the issue on this line. iv. The case pertains to liquor business but the AO has not cared to make any enquiry from excise department regarding the purchases made or excise duty paid. The AO has also not enquired about the source of bidding amount(s) paid by the assessee AOP for obtaining the liquor license. v. The assessee has shown unsecured loan of Rs.2.99 crore during the year. The AO has not made any in-depth enquiry on this issue. He failed to verify the genuineness and creditworthiness of the persons extending unsecured loans to the assessee AOP. vi. The assessee AOP has shown substantial sundry creditors amounting to Rs.2.66 crore but the AO has not made any verification. It is expected from the AO to verify atleast few creditors on test-check basis to ascertain the genuineness and correctness of creditors shown on the liability side of the Balance Sheet. Printed from counselvise.com ITA No. 100/LKW/2022 Page 5 of 37 vii. The assessee has not examined various expenses claimed in the P & L A/c. No documentary evidences have been obtained. No third party verification has been undertaken by the AO. There are many expenses like assessment fees' amounting to Rs. 1,58,27,640/-; 'form fees' amounting to Rs.3,90,54,400/- which have neither been examined nor any documentary evidences have been obtained. viii. The assessee has shown Rs. 1,00, 46, 114/- as 'VAT payable' on the liabilities side of the Balance Sheet. The AO has not examined this issue in context of section 43B of the IT Act, 1961. No documentary evidence has been obtained to verify whether the assessee AOP has paid it before filing of ITR. Besides the assessee as also debited Rs. 1,40,46,274/- on account of VAT in the P & L A/c but no documentary evidences is available on file. Ix. The case was picked up for complete scrutiny. However, besides routine queries made, no concerted effort seems to have been made to examine the Books of accounts. No third party enquiries have been undertaken and the AO has accepted all balances in Balance Sheet and P & L account as submitted by the assessee as true and correct without any verification. x. Thus, during the course of assessment proceedings, the Assessing Officer has not examined /enquired into the details of facts of the case by making the assessment order u/s 143(3) of the IT Act as erroneous in so far as prejudicial to the interest of the revenue as per explanation 2 to section 263 of the IT Act, 1961. 3. Thereafter, on change of incumbency, a fresh notice was sent on 18.11.2021, 10.01.2022, 28.01.2022 and 01.02.2022. The assessee during the proceedings has filed the following submissions: \" Respected Sir Ref- In the matter of M/s Subhash Jaiswal Associates Bareilly Assessment Year 2017-2018 Sub- Reply to Your Honours show cause notice u/s 263 of the Income Tax Act 1961 With reference to the above and in compliance to Your Honour\" s notice dated 03.12.2020 we most respectfully submit as under: At the very outset it may be explained that the assessee is an Association of persons engaged in the trading of liquor. The assessee operates various liquor vends which are allotted in the name of members. All the investments, inter alia, in the business towards licence fees, purchases etc. is done by the AOP and sales pertain per to the assessee AOP. Accordingly TCS is also collected in the name of the assessee by various parties and deposited to the credit of central government account. The Books of accounts are regularly maintained by the assessee and duly audited as per the statutory provisions contained in section 44AB of the Income Tax Act 1961. Each and every item of income and expenditure is duly vouched and verifiable. Further, the assessee was completed u/s 143(3) of the act by the assessing officer, after making due enquiries and examination by the assessing officer. It may also be appreciated that the Printed from counselvise.com ITA No. 100/LKW/2022 Page 6 of 37 main reasons for selection of the case under scrutiny were \"Cash Deposited during Demonetization\", and each and every reason was dealt with by the assessing officer during the course of the proceedings. It is further submitted that the assessee is making submission on legal grounds as well as the merits, which are dealt with at the later part of the reply. Your Honour will appreciate that it is within the province and jurisdiction of the Assessing officer to decide which points he wants to take up for enquiry and to what extent and, as such, it is a law that the Learned Commissioner of Income Tax cannot interfere with the same and even if Learned Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceeding. On the facts of the instant case, it would not be out of the context to state that the impugned scrutiny assessment was not lacking any information, search results and directions from higher authorities, in as much as nothing has been recorded to that effect in the assessment order. The assessee wishes to challenge the initiation of the revisionary proceedings based on the following challenges, which are dealt one at a time for clarity: a. Clarification regarding explanation 2 of Section 263 and difference between lack of enquiry and inadequate enquiry b. Where two views are possible and the AO adopts one view with which the CIT does not agree, the order cannot deemed to be erroneous or prejudicial to the interest of the Revenue even if there is a loss of the revenue c. Powers u/s 263 cannot be invoked merely because the CIT had a different opinion on the matter d. The Assessing officer has complete jurisdiction over the extent of inquiry required to be conducted and the CIT cannot invoke the provisions of Section 263 of the Income Tax Act, 1961 to revise the order passed by the assessing officer simply due to the fact that the CIT has an opinion different from that as passed by the assessing officer. Clarification regarding explanation 2 of Section 263 and difference between lack of enquiry and inadequate enquiry: There is a clarification provided in Explanation 2 of Section 263 for revisionary proceedings which highlights the fact that there is a difference between inadequate enquiry and lack of enquiry. The explanation deals with the proceedings u/s 263 being valid when the assessing officer has passed the assessment order without making inquiries in the matter. In the given case, the assessing officer has duly made inquiries as well as examined the case at length. Therefore, it cannot be said that no enquiry has been conducted by the assessing officer. As mentioned above, it is completely up to the jurisdiction and opinion of the assessing officer himself to judge the extent to which he wants to examine an issue. The extent to which a matter is discussed in the assessment order is also a judgment matter since it is not necessary that the assessing officer outlines the entire discussion at length in the assessment order passed by him. It is not necessary that the extent of examination of an issue deemed necessary by the PCIT/ CIT would be the same as the assessing officer who was in charge of the case at the time.\" Printed from counselvise.com ITA No. 100/LKW/2022 Page 7 of 37 The assessee has also relied on various judicial pronouncements in support of his contention. 4. This case was picked up for complete scrutiny and the CASS selections reason was: a) Large Cash deposited during demonetization period The assessee AOP deals in retail liquor business. On examination of records, it is evident that the said assessment order was passed without proper enquiry with regard to the following points: i) No enquiry made by the AO regarding genuineness of the source of cash deposit in old SBNs of Rs. 6.08 crores during demonetization period. ii) AO did not enquire about the details of license issued to him for the trading of liquor. iii) AO did not examine about genuineness and creditworthiness of the persons who had id given given unsecured unsecured loans of Rs. 2.99 crores to the assessee. Further, no enquiry were made by the AO regarding the genuineness and correctness of sundry creditors amounting Rs.2.66 crore shown in the liabilities of the balance sheet of the assessee. iv) There were many expenses like 'assessment fees' amounting Rs.11,58,27,640/-; 'form fees' amounting Rs.3,90,54,400/- which have not been examined by the AO with regard to genuineness of the expenses claimed nor whether the same were allowable as per provisions of the Act. The Assessing officer has passed the assessment order on 15.12.2019 u/s 143 of the Act without enquiries on the above issues and accepted submissions of the assessee. 5. It is apparent from the submissions filed by the assessee during the proceedings that the assessee has not submitted any reply with regard to specific points raised in the show cause notice issued during proceedings u/s 263, on basis of which it was held by Pr. CIT that the assessment order has been passed by the AO without enquiries on these issues during assessment proceedings. 6. Following judicial pronouncements relevant to the facts of the case discussed and hence are relied upon while adjudicating this case: (i) Hon'ble Jurisdictional High Court of Allahabad in the case of Meerut Roller Flour Mills Ltd. vs CIT(2013) 35 Taxmann.com 13(Allahabad) held that,\" Return filed by assessee was scrutinized and assessment was completed. Thereafter, Commissioner noticed that AO had not conducted proper enquiry to verify cash credit entries and trade creditors- He exercised his jurisdiction u/s 263 and remanded matter to AO- Assessee filed writ petition against the order. Records showed that AO did not verify genuineness of trade creditors and assessment order was completely silent and bereft of any discussion on material points- Whether, therefore, assessment order was erroneous and prejudicial to interest of Revenue.\" Held, yes. Printed from counselvise.com ITA No. 100/LKW/2022 Page 8 of 37 It was further held by the Hon'ble Court that \"The Commissioner may consider an order to be 'erroneous' for the purpose of section 263 even if error of law may not be apparent on the face of the order. The Commissioner may consider an order of the assessing authority to be erroneous not only if it contains some apparent parent error of reason or of law or of fact on the face of it but also because it is stereotype e order order which which simply accepts what the assessee has stated in his report and fails to make inquiry which are called for in circumstances of the case.\" (ii) Further in the case of Ram Pyari Deri Saraogi v/s CIT(1968) 67 ITR 184, the Hon'ble Apex Court while examining the question of revisional power of the CIT under the old Act held that, \"where assessment was completed by the ITO with under haste, without holding necessary enquiry, it is sufficient to hold that the assessment order is erroneous.\" (iii) In the case of Smt Tara Devi Agarwal v/s CIT(1973) 88 ITR 323(SC), it was held by the Hon'ble Apex Court that, \" even where income has not been earned and is not assessable merely because the assessee wants it to be assessed in his or her end in order to assist someone else who would have been assessed to a larger amount, the assessment to made can certainly be erroneous and prejudicial to the interest of revenue.\" (iv) Hon'ble Delhi High Court in the case of Gee Vee Enterprises v/s Addl.CIT(1975) 99 ITR 375(Delhi) following the aforesaid above two judgements of the Hon'ble Apex Court held that \"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 minimum amount of evidence may be accepted by Civil Court in absence of any rebuttal. The Civil Court is neutral. It simply gives decision on the basis of the pleading and evidences which comes before it.\" Further, it was held by the Hon'ble Court that: \"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 apparent in the order but call for further enquiry. It is his duty to ascertain the e truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The meaning to be given to the word \"erroneous\" in section 263 emerges out of its 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 an enquiry prudent that the word \"erroneous\" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all facts stated therein are assumed to be correct.\" 7. In view of the facts of the case discussed and judicial pronouncements relied upon, I am of the opinion that the AO has not examined/enquired into the details of the facts of the case and the assessment order passed u/s 143(3) of the Act is erroneous in so far as prejudicial to the interest of revenue as per explanation 2(a) to section 263 of the Income Tax Act, 1961. Therefore, the assessment framed by AO is hereby set aside to be framed denovo as per law by the AO, keeping into view the observations made after giving reasonable opportunity to the assessee of being heard.” Printed from counselvise.com ITA No. 100/LKW/2022 Page 9 of 37 (B.1) The present appeal has been filed by the assessee against the aforesaid order dated 21.02.2022 passed by the Ld. PCIT u/s 263 of the Act. In the course of appellate proceedings in Income Tax Appellate Tribunal (ITAT), a paper book containing the following particulars was filed from the assessee’s side: - (B.1.1) Further, a list of case laws relied upon by the assessee was also filed from the assessee’s side. In the course of appellate proceedings in ITAT, which is reproduced below, for the ease of reference: - Malabar Industrial Co. Ltd. (2000) 243 ITR 83 (SC) The That \"a bare reading of this provision makes it clear that the pre- requisite to the exercise of jurisdiction by Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. 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 is prejudicial to the Revenue recours3 cannot be had to S. 263 (1) of the Act. CIT v. Gabriel India Ltd., 203 ITR 108 Bombay (1993) In this case, the assessee had claimed certain expenses as revenue expenditure. The Income-tax Officer (ITO) sought details of the same and the assessee gave the details and explained the nature of expenditure. Printed from counselvise.com ITA No. 100/LKW/2022 Page 10 of 37 The ITO considered the explanation and allowed the same but did not include the discussion in this regard in the assessment order. The commissioner initiated proceeding u/s 263 on the ground that such expenditure was capital expenditure and as such the order of the ITO was erroneous so as to be prejudicial to the interests of the Revenue. assessee offered the explanation that the issue was examined in detail by the ITO. The CIT passed a order observing that ITO had not discussed the allowability of the expenses in the Assessment Order an this indicated non-application of mind. He cancelled the order of the ITO directing him to make a fresh assessment on the lines indicated by him. CIT V LAND INFRASTRUCTURE DEVELOPMENT PROJECTS LTD. [2013] 357 ITR 763 (Mad) REVISION - COMMISSIONER POWERS CONDITION PRCEDENT - ASSESSMENT ORDER MUST BE ERRONEOUS AND PREJUDICIAL TO REVENUE - BOTH CONDITIONS MUST BE SATISFIED - NO SPECIFIC ERROR IN ASSESSMENT ORDER ODER OF REVISION NOT VALID - INCOME-TAX ACT, 1961, 5.263. Unless the basis of revision satisfying the twin conditions, namely, assessment order erroneous and prejudicial to the interests of the Revenue, are pointed out by the Commissioner in invoking section 263 of the Income-tax Act, 1961, the assessee is entitled to raise the question of jurisdiction. Assumption of revisional jurisdiction can be justified only on the basis of materials indicating the order of assessment as erroneous and prejudicial to the interests of the Revenue. The assessee had borrowed secured loans by issue of redeemable non- convertible debentures to the tune of Rs. 60 crores, but utilized the loans towards investment in shares. The assessee claimed interest and finance charges to the extent of Rs.4.46 crores to pay interest on the debentures issued. Alleging that the Assessing Officer had not considered the provisions of section 14A of the Act in the proper perspective and tat the interest claimed by the assessee was not related to the funds deployed in activities from which income had been shown during the year, the assessment was revised. The Tribunal pointed out that the assessee had borrowed secured loans by issue of redeemable non-convertible debentures to the tune of Rs. 60 crores and there was no material to hold the assessee made any investment from the date of issue of redeemable non-convertible debentures between March 17, 2004, and March 31, 2004. In the circumstances, the assumption that the loan was utilized for non-tax investment was not correct. It set aside the order of revision. Our appeal to the High Court: Held, dismissing the appeal, that the Tribunal, as a matter of fact, found that the redeemable non-convertible debentures were issued between March 17, 2004, and March 31, 2004, and there were no investments made during this period. This being a pure and simple factual finding, which had not been denied by the Revenue, the finding had to be accepted. Hence, there was no specific error in the assessment order. This order could not be revised. CIT v. Max India Limited (2007) 295 ITR282 (SC) Malbar Industries Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) Printed from counselvise.com ITA No. 100/LKW/2022 Page 11 of 37 When the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable law. Commissioner of Income Tax v. Sunbeam Auto Ltd. (011) 332 ITR 167(Del), Delhi High Court 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 the exercise of power by 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 predicts 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. Income Tax Officer v. Dg. Housing Projects Ltd. ITA No.179/2011 HC of Delhi - Dt. of order 1.3.2012 343 ITR 329(Delhi) In the present case, the findings recorded not gone into and has not given any by the Tribunal are correct as the CIT has reason 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 Office 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 respondent's 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 in 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 Printed from counselvise.com ITA No. 100/LKW/2022 Page 12 of 37 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. TAX V FOUNDATION JYOTI [2013] ITR 388 (DELHI) DIRECTOR OF INCOME- scope of section 263 Revision AUTHORITY FEELING REVISING REVISING INQUIRY INADEQUATE AUTHORITY MUST MAKE ENQUIRY AND SHOW THAT ASSESSMENT ORDER WAS ERRONEOUS - REVISING AUTHORITY HAS NO POWER TO REMAND AND DIRECT ASSESSING OFFICER TO CONDUCT ENQUIRY INCOME TAX ACT 1961, S.263. Revisionary power under section 263 the Income-ax Act, 1961, 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 interests of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests 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 interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation required or deeper or further scrutiny should be undertaken. In cases where there is inadequate enquiry but not lack of enquiry, the Commissioner must record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous was Held, dismissing he appeal, that inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called for. The inquiry should have been conducted by the 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 inquiry. CIT v. Vikas Polymers (2010) 194 Taxman 57 (Delhi)(HC) Haryana Coach Body Builders (2006) 10 SOT 736 (Delhi) Mere lack of inquiry by Assessing Officer is not sufficient for revision under section 263. Asstt. Order cannot be held to be erroneous, if in opinion of the CIT order should have been more elaborate or that further enquiry should have been made. Whether what is proper, requisite and desired enquiries in relation to various matters have to be left to best discretion of the AO. CIT v. Mohd. Ishaq Mohd. Gulam 276 ITR 13 (MP) Printed from counselvise.com ITA No. 100/LKW/2022 Page 13 of 37 To make further enquiry. CIT v. Ganpat Ram Bishnoi 152 Taxman 242 (Raj) (296 ITR 292) Whether jurisdiction u/s 263 cannot be invoked for making enquiries or to go into process of assessment again and again merely on basis that more enquiry ought to have been conducted to find something. CIT v. Mangilal Didwania 28C ITR 126 (Raj) Whether AO has made proper enquiry. with due application of mind or not, is not the domain of the CIT to judge. The fact that the AO has made enquiries is sufficient itself. Balram Manmani v. ACIT 7 SOT 368 (Lucknow) ITAT Whether since the assessment has been made by the AO after taking into account the submissions as well as evidence filed before him and no material whatsoever had been sought or recorded by CIT which showed that there was any discrepancy or falsity in evidences furnished by assessee order passed by AO cannot be revised. Salora International ACIT (205) 02 SOT (Delhi) Tribunal). 705 Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by AO while making assessment, the assessment order cannot be declared to be erroneous and prejudicial to the interest of Revenue. CIT v. Arvind Jewellers, 259 ITR 502 (Guj) The court held that the assessee had produced relevant material and offered The court held that the assessee had explanations in pursuance of the notices issued u/s 142(1) as well as u/s 143 (2) of the Act and after considering the materials and explanations, the Income-tax Officer had come to a definite conclusion. Merely because the Income-tax Officer had taken a particular view with which the Commissioner did not agree cannot form the basis for an action u/s 263 of the Act and as such order of Revision was not justified. The Gujarat High Court applied the principles laid down by the Supreme Court in the case of Malabir Industrial Co. Ltd.'s case mentioned above and decided the case in favour of the assessee. ACIT v. Technip Italy Spa (2006) 150 Taxman 13 (Delhi) (Trib) The error envisaged by Section 263 is not one that depends on possibility or guess work, but it should actually be an error either of fact or of law. Antala Sanjaykumar Ravjibhai v. CIT (2012) 135 ITD 506 (Rajkot) (Trib) Section 263 does not visualize a case of of judgment of substitution Commissioner for that of the Assessing Officer, unless the decision is held to be erroneous. Vijay Kumar Megotia v. CIT (2010) 3 ITR (T) 760 (Pat.) (Trib) Printed from counselvise.com ITA No. 100/LKW/2022 Page 14 of 37 When the Assessing Officer has specifically mentioned in the order that books of accounts along with purchase/sales, invoices, ledgers, bank accounts were examined, verified and test checked, setting aside by Commissioner, in absence of any finding that Assessing Officer's order is factually incorrect, and not justified. Roshan Lal Vegetable Products (P) Ltd., v. Income-tax Officer Appeal No.6(ASR) of 2010 A.Year: 2006-07 Section 263 of the Income-tax Act, 1961 Revision Off orders prejudicial to interest of revenue Assessment year 2006-07 Whether where Assessing Officer having examined material on Fine Jewellery (India) Ltd. vs. Assistant Commissioner of Income- tax:[2012] 19 ITR (Trib) 746 (Mumbai) record in detail, made various disallowances, assessment order so passed by him could not be regarded as erroneous and prejudicial to interest of revenue and, therefore, invocation of jurisdiction under section 263 by Commissioner in such a case could not be The assessee was engaged in the business upheld-Held, yes (in favour of assessee.) of manufacture and export of jewellery. During the course of the assessment proceedings, while examining the details of expenses relating to the head \"miscellaneous expenses\", the Assessing Officer took the view that expenses on account of repairs and maintenance were capital expenditure and disallowed them. Besides this, he also made a disallowance of section 40(a)(ia) of the Income-ax Act, 1961. This order was revised and cancelled by the Commissioner under Section 263 of the Act on the ground that the expenses claimed for the creation of brand were capital expenditure for creating an intangible asset. On appeal by the assessee: Held, allowing the appeal, that there was a complete application of mind by the Assessing Officer while examining the expenditure under brand promotion and brand building. The expenditure incurred by the assessee was not on creating any enduring benefit an asset but was rather helping the assessee in augmenting its sales and resultantly its profit. Even if it was presumed that the building of brand image was giving advantage of enduring benefit to the assessee, still it would be on revenue account as there was no creation of a tangible or intangible asset of enduring nature to the assessee. expenses had not resulted in any kind of addition or augmentation of any profit-making asset. Thus the view taken by the AO was prima facie correct and, therefore there was no reason to hold that such an order was erroneous or prejudicial to the interest of Revenue. Thus, the order of the Commissioner was to be cancelled. Amrit Singh v. ITO (2003) 127 Taxman (Mag.) (Chd.) (Tribunal) In these cases, it was held that assessment framed under section 143(3) cannot be revised on that desired inquiry was not made. Baljees v. ACIT (2003) 127 Taxman 150 (Mag.) (Chd.) (Tribunal) 22 Ratlam Coal Ash Co. v. CIT 171 ITR 141 (MP) Assessing Officer was prima facie correct and, therefore, there was no reason to hold that such an order was erroneous or prejudicial to the Printed from counselvise.com ITA No. 100/LKW/2022 Page 15 of 37 interests of the Revenue. Thus the order of the Commissioner was to be cancelled. In these cases, it was held that assessment 87 framed under section 143(3) cannot be revised on n that desired inquiry was not made. REVISION ORDER OF REVISION BY COMMISSIONER ON THE GROUND THAT ITO HAD NOT MADE PROPER ENQUIRIES - FINDING BY TRIBUNAL THAT ASSESSEE HAD FURNISHED REQUISITE INFORMATION AND ITO HAD CONSIDERED FACTS AND COMPLETED THE ASSESSMENT ORDER OF REVISION NOT VALID INCOME-TAX ACT 1961, S. 263. An order of assessment was revised by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, on the ground that the Income-tax Officer had not made proper enquiries. The order of revision was set aside and the Income-tax Officer's order was restored by the Tribunal because it found that the assessee had furnished the requisite information and the Income-tax Officer had completed the assessment after considering all the facts. On a reference: Held, that, on the facts and in the circumstances of the case, the Tribunal was justified in law in reversing the order of the Commissioner of Income- tax made under section 263 and restoring that of the Income-tax Officer. BAGARIA VEGETABLE PRODUCTS LTD. v JCIT [2008] 303 ITR (AT) 278 (Pune) REVISION COMMISSIONER AND EXAMING OFFICER ENQUIRING INTO MATTER POWERS OF ASSESSING ACCOUNS ACCEPTANCE OF RETURNS BY ASSESSING OFFICER ORDER NOT ERRONEOUS AND COULD NOT BE REVISED-INCOME-TAX ACT, S. 263. 1961, The assessee was a limited company belonging to the Bagaria group of Aurangabad/Mumbai. There was an action under section 132 of the Income-tax Act, 1961, on this group between June 29, 1998 and July 2, 1998. The assessee was also covered by this search and seizure action. No incriminating documents were seized or found during the course of search. The assessee filed a block return showing nil income. The regular returns were filed up to the assessment year 19998-99 at Mumbai. After verification, the Assessing Officer came to the conclusion that undisclosed income of the assessee was nil. For the purpose of block assessment, the block period comprised the assessment years 1988-89 to 1998-99 plus a broken period from April 1, 1998, to July2, 1998. For this broken period of 3 months, the assessee had shown income of Rs. 13,05,103. However, this was not assessed as undisclosed income, since it was reflected in the books of account. The assessee filed a regular return for the assessment year 1999-2000 on December 16, 1999 showing total income at Rs. 2,92,869. This period of 12 months also covered the broken period from April 1, 1998 to July 2, 1998. The return was accompanied by an audited balance-sheet and tax audit report. The auditors had reported that full quantitative details were maintained by the assessee for the entire manufacturing done. The raw materials, finished goods, packing material and consumable stores were valued at market rice. On a perusal of the records, the Commissioner of Income-tax formed the opinion that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue as the Assessing Officer had not conducted sufficient enquiry/scrutiny/verification and had Printed from counselvise.com ITA No. 100/LKW/2022 Page 16 of 37 accepted the return filed by the assessee as such. He set aside the order. On appeal to the Tribunal : Held, per K.P. T. Thangal (Vice President) and B.L. Chhibber (Accountant Member): (U.B.S. Bedi (Judicial Member) (dissenting), that it was clear that the Assessing Officer had not only gone through the books of account which were verified up to the date of raid, he had also taken into consideration the tax audit report. The tax audit report can only be up to the end of the assessment year. The Assessing Officer had noted that the accounts were quantitatively supported. Therefore, the observation of the Commissioner of Income-tax that the books of account had been verified only up to the date of raid was not correct. Another reason for invoking the jurisdiction vested in him under section 263 was that the method of valuation of the stock and details of such valuation were not filed by the assessee. This observation also appeared to be incorrect. The order under section 263 was not valid. Saw Pipes Ltd. v. CIT (2005) 3 SOT 327 (Delhi) Merely because proper enquiry was not conducted by Assessing Officer, assessment order would not become prejudicial. Section 253 of the Income-tax Act, 1961 -Revision - Of orders prejudicial to interest of revenue Assessment year 2000-01 Whether merely because proper enquiry was not conduced by Assessing Officer, assessment prejudicial order would become Whether Held, no conclusion of Commissioner under section 263 that order of assessment is prejudicial to interest of revenue is a matter of subjective satisfaction of Commissioner Held, no declaration of certain income by assessee Whether can by no stretch of imagination be prejudicial to interest of revenue unless same does not belong to him - Held, yes -Whether an order to be erroneous and prejudicial has to be found out on basis of some material and cannot be based merely on guess work - Held, yes. Circulars and Notifications - Circular No. 601, dated 4-6-1991 - Notification No. SO. 69€, dated 25-1-1996. Brij Bhushan Agarwal v. CIT (Agra) 2 SOT 811 (2005) Of Section 263, read with section 68 of the Income-tax Act, 1961 - Revision orders prejudicial to interest of revenue -Assessment year 2000- 01 Whether assessment order which has been subject-matter of proceeding under section 263 may be a cryptic one but that itself does not render assessment order to be erroneous and prejudicial to interest of revenue Held, yes Assessee received gifts from various persons and unsecured loans He filed gift deeds, copies of their balance sheets, computation of their income, confirmation and in many cases, copies of bank accounts also - All donors and creditors had filed their return of income showing sufficient income Assessing Officer passed assessment order after consultation with and under supervision of Joint Commissioner and on appreciation of evidence furnished by assessee. Whether documentary evidence furnished by assessee was sufficient to established all three ingredients, i.e., identity, capacity and genuineness of transactions both in case of donors as we as creditors and, therefore, assessment order, though may be cryptic, was neither erroneous nor prejudicial to interest of revenue Whether Held, yes Commissioner was Printed from counselvise.com ITA No. 100/LKW/2022 Page 17 of 37 not justified in setting aside assessment order by invoking his power vested by provision of section 263 -Held, yes CIT v. Associated Food Products P. Ltd. 280 IIR 377 (MP) Order u/s 143(3) completed in a haste. No jurisdiction u/s 263 Goyal Family Trust v. CIT 171 ITR 698 (Alld) Merely because the AO's order is brief and cryptic that itself would not be a case for revision. Hari Iron Trading Co. v. Commissioner of Income-tax-263 ITR 437 A bare perusal of the aforesaid provision shows that the Commissioner can exercise powers under sub-section (1) of section 263 of the Act only after examining \"the record of any proceedings under the Act\". The expression \"record\" has also been defined in clause (b) of the Explanation so as to include the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether control over the way assessment order is drafted. The assessee an on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additional disallowances are made. As already observed, we have examined the records of the case and find that the Assessing Officer had made full inquiries before accepting the claim of the assessee qua the amount of Rs. 10 lakhs on account of discrepancy in stock. Not only this, he has even gone a step further and appended an office note with the assessment order to explain why the addition for alleged discrepancy in stock was not being made. In the absence of any suggestion by the Commissioner as to how the inquiry was not roper, we are unable to uphold the action taken by him under section 263 of the Act. Another fact which deserves mention in this case is that in response to the show-cause notice, the assessee had raised a out that the legal issue pointing assessment in its case had been made under effective monitoring of the Commissioner of Income-tax and had been finalized with his approval. As already observed, the Commissioner of Income-tax has not bothered to examine the specific objections raised by the assessee in its reply in the impugned order and the Tribunal has rejected the same summarily by observing that the objections were not supported by any material. Both the authorities have failed to take the trouble of even referring to the assessment record. CIT vs. Ashish Rajpal 180 Taxman 623 (Delhi) Order dt. May 14, 2009. Section 263 of the Income-tax Act, 1961 -Revision Of orders prejudicial to interest of revenue Assessment year 2002-03 Whether merely because an assessment order does not refer to queries raised by Assessing Officer Printed from counselvise.com ITA No. 100/LKW/2022 Page 18 of 37 during course of scrutiny and response assessee thereto, it can be said that there has been no enquiry and, hence, assessment is erroneous and prejudicial to interest of revenue Whether it is requirement of section 263 Held, no that assessee must have an opportunity of being heard in respect of those errors which Commissioner proposes to revise Held, yes Whether to accord such an opportunity after assessment order would meet mandate of setting aside section 263 Held, no Whether where notice issued by Commissioner before commencing proceedings under section 263 referred to four issues and final order passed referred to nine issues, revisional proceedings were vitiated as a result of breach of principles of natural justice Held, yes Anil Shah vs. ACIT 162 Taxman 39 (Mum) (Mag) Order dt. April 21, 2006 Section 263, read with section 80HHC, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue -Assessment year 2000-01 - Whether if all relevant details have been filed by assessee and Assessing Officer allows assessee's claim, decision of Assessing Officer cannot be held to be erroneous simply because in his order he does not make any elaborate discussion in that regard - Held, yes Section 143 of the Income-tax Act, 1961 -Assessment - General - Assessment year 2000-01 Whether in normal practice whenever any claim of assessee is accepted, Assessing Officer may not give any discussion in his order and Jashn Beneficiary Trust vs. ACIT 88 Taxmann.824 (Jabalpur-Trib.) Order dt. March 15, 2017 to discussion is confined only disallowance made by him - Held, yes Where Section 45 of the Income-tax Act, 1961 Capital gains - Chargeable as (Business income v. capital gains: share dealing) Assessment year 2011-12 Assessing Officer made enquiry in respect of sale of shares and loss incurred by assessee on sale of such shares was allowed to be set off against profit on sale of shares, it was not a case of lack of enquiry on part of Assessing Officer and, therefore, Commissioner could not take action under section 263 [In favour of assessee] The assessee-trust purchased certain shares of a company in name of its trustee and later on sold same at loss. This loss was set off against gain of shares of another company. The Assessing Officer allowed the claim of the assessee. Subsequently, the Commissioner set aside the assessment order on the ground that capital loss was wrongly claimed by the assessee and allowed by the Assessing Officer. Held that from the copy of the balance sheet which were before the Assessing Officer, it was apparent that the shares were held as investment. One cannot agree with the Commissioner that the trust cannot hold the shares in the name of the trustee. Rather in the case of unregistered trust, section 153 of the Companies Act, 1956 stipulates that the name of the trust cannot be entered as member of the company. This was a case where the assessee had duly explained to the Assessing Officer in response to the notice under section 142(1) and subsequent query that the assessee had purchased 17 lakhs shares through their broker as per the loan agreement and sold these shares on loss. The details in respect of these were also submitted before the Assessing Officer. Thus, this was not a case of lack of inquiry on the part of the Assessing Officer so far as it related to the examination of loss on the sale Printed from counselvise.com ITA No. 100/LKW/2022 Page 19 of 37 of 17 lakhs equity shares and set off of the same against the short-term capital gain derived by the assessee on the sale of shares. Since the Principal Commissioner had not suggested the basis of the inquiry or verification to be carried out by the Assessing Officer and its relevancy with the setting off of the short-term capital gain against the short-term loss, the order passed by the Assessing Officer could not be deemed to be erroneous insofar as it was prejudicial to the interests of the revenue. Section 263 of the Income-tax Act, 1961 -Revision Of orders prejudicial to interest of revenue - Assessment year 2011-12 - Where Assessing Officer after examining issue on points preferred not to make addition, there was no error in order of Assessing Officer if he had not discussed issue, relating to each and every issue in assessment order [In favour of assessee] Metro Development vs. Pr. ITA No. CIT. This appeal in ITA No.635/Mum/2022 for A.Y.2017-18 preferred by the order against the revision order of the Id. 31.10.2022. 635/Mum/2022 Order dt. Principal Commissioner of Income Tax, Mumbai-27 u/s.263 of the Act dated 31/03/2022 for the A.Y.2017-18 2. The only issue to be decided in this appeal is as to whether the Id. PCIT was justified in invoking revision jurisdiction u/s.263 of the Act in the facts and circumstances of the instant case on the ground that no enquiries had been carried out by the ld. AO while framing the assessment. 3. We have heard rival submissions and perused the materials available on record. The assessee is a partnership firm engaged in the business of construction and deriving income from business. The return of income for the A.Y.2017-18 was filed by the assessee firm on 31/10/2017 declaring total income of Rs.1,89,50,750/-. The case was selected under 'Limited Scrutiny' and accordingly, notice u/s.143(2) of the Act for the purpose of verification of (i) unsecured loans (ii) squared up loans and (iii) investment in immovable property. The aforesaid items were subjected to verification under 'Limited Scrutiny' and accordingly, the Id. AO sought information vide notice u/s.142(1) dated 06/09/2019 regarding the aforesaid items directing the assessee to furnish the details in the prescribed format. The Id. AO issued yet another notice u/s.142(1) of the Act on 28/11/2019 making a specific query to the assessee stating that from the details furnished by the assessee in response to the earlier questionnaire, there were certain loans taken from persons who had not filed their returns of income Accordingly, the assessee was directed to furnish the list of persons together with their name, PAN, complete postal address, e-mail ID and details of deduction of tax at source on interest payment made to them. The assessee in response thereto, again furnished the requisite details to the Id.AO in the course of assessment. The replies were filed by the assessee vide letter dated 19/09/2019, 13/11/2019 an 30/11/2019. The assessee had duly furnished the entire details of borrowings made by it in a tabular form containing the name, address, PAN, loan taken during the year, loan squared up during the year, interest component thereon and TDS details thereon, in the above mentioned submissions. The assessee had also furnished a confirmation from the lenders, PAN copy of the lenders, bank statement of the lenders, Printed from counselvise.com ITA No. 100/LKW/2022 Page 20 of 37 ITR acknowledgement copy of the lenders, among others, in most of the cases. The Id. AO selected 7 parties from the said list and proceeded to issue notice u/s.133(6) of the Act in the assessment proceedings, out of which, some representing parties from whom loans were taken during the year. All the parties duly responded to the notice u/s.133(6) of the Act by furnishing the requisite documents, inter alia, copy of their return of income, loan confirmation and bank statements before the Id. AO directly. The Id. AO was accordingly, satisfied with the said reply and proceeded not to make any addition in respect of unsecured loans in the assessment. 4. This assessment was sought to be revised by the Id. PCIT by invoking his revision jurisdiction u/s.263 of the Act on the ground that the Id. AO had not made adequate enquiries with regard to receipt of unsecured loans. The Id. PCIT also observed that out of 79 parties from whom loans were received, the Id. AO had only resorted to make sample verification of 7 parties u/s.133(6) of the Act. In this regard, the assessee submitted that in respect of 72 parties, the assessee had duly proved the creditworthiness of the lenders, identity of lenders and genuineness of transactions before the ld. AO by furnishing the copy of PAN, bank statements and ledger confirmations thereon. The said documents were again re-submitted before the Id. PCIT by the assessee. With regard to 7 parties to whom notices were issued u/s.133(6) of the Act by the Id. AO, the assessee submitted that those parties have directly responded before the Id. AO by furnishing the requisite details u/s.133(6) of the Act by furnishing the requisite documents called for by the Id. AO. Accordingly, the assessee objected before the Id. PCIT that this is not a case where the assessment was completed without making adequate enquiries on the issue subjected to be enquired. 5. In this regard, we have gone through the show-cause notice issued by the Id. PCIT on 02/03/2022. In the said notice, the Id. PCIT had only sought for unsecured loans which, in his opinion, had not been examined by the Id. AO while completing the assessment. The assessee made its detailed submissions in response to the said show-cause notice before the Id. PCIT. But we find from the order of the Id. PCIT u/s.263 of the Act, the ld. PCIT had sought to direct the Id. AO to examine various other issues which were not even subject matter of either show-cause notice or any opportunity being given to the assessee of being heard to make its submissions thereon, in respect of issues contained in paragraphs 4.3 to 4.6 of his order. Hence, in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Amitabh Bachchan reported in 240 Taxman 221 wherein it has been categorically held even if a particular issue is not mentioned in the show-cause notice by the Id. PCIT, the assessee should at least be given reasonable opportunity of being heard to address the issues on which the Id. PCIT is seeking to revise the order. In the instant case, admittedly opportunity of hearing was given to the assessee only in respect of unsecured loans received by the assessee. Hence, even the interest payment on such unsecured loan which were sought to be revised by the Id. PCIT on the ground that verification was not carried out by the Id. AO is incorrect as the same is not subject matter of opportunity given to the assessee even though it is consequential offshoot of the main issue of receipt of unsecured loans. Hence, by placing reliance on the aforesaid decision of the Hon'ble Supreme Court, we have no hesitation to hold that the Id. PCIT grossly erred in invoking revision jurisdiction in respect of interest on unsecured loans and various items listed on paragraphs 4.3 to 4.6 of his order. Moreover, we find from the perusal of the assessment order that the return was selected only for Limited Scrutiny. The ld. AO Printed from counselvise.com ITA No. 100/LKW/2022 Page 21 of 37 had carried out those items which were mandated to be verified by him in the Limited Scrutiny. The items mentioned in paragraphs 4.3 to 4.6 of the order of the ld. PCIT does not fall in the ambit of verification under Limited Scrutiny. Hence, no error could be attributed in the order of the Id. AO to this extent. Accordingly, the revision jurisdiction u/s.263 of the Act cannot be invoked by the Id. PCIT on these issues. The revision order passed u/s.263 of the Act on these issues are hereby dismissed and quashed. 6. With regard to receipt of unsecured loans by the assessee, the Id. PCIT had stated that the ld. AO had not made adequate enquiries while framing the assessment. But from the perusal of the various documents enclosed in the paper book of the assessee, we find that the Id. AO had issued notices u/s.142(1) of the Act on 06/09/2019, 28/11/2019 asking for complete details of unsecured loans received by the assessee in tabular form. We find that these details were furnished by the assessee vide letter dated 19/09/2019,13/11/2019 and 30/11/2019 and copy of these replies were filed in the prescribed tabular form which are enclosed in pages 54-85 of the paper book filed before us. Further from the details submitted by the assessee in the tabular form, the Id. AO had sought to select 7 parties out of the said list and made further examination by issuing notice u/s.133(6) of the Act to those seven parties. All the seven parties duly responded directly before the Id. AO in response to notice u/s.133(6) of the Act by filing all the requisite details called for thereon. We find that the Id. AR had also placed on record the complete copy of the order sheet notings which are enclosed herewith in pages 139-146 of the paper book. In the said order sheet notings, the response filed by the assessee on various dates stated supra were duly noted and acknowledged by the Id. AO. Even the notices issued u/s.133(6) of the Act to various parties, replies received from them were also acknowledged by the Id.AO in the said order sheet noting. Further the Id. AO had also noted in the said order sheets that the notices were issued u/s.133(6) of the Act to certain parties on sample basis and the reply furnished thereon by them were checked and examined by him. All these facts clearly go to prove that adequate and requisite enquiries were indeed carried out by the Id. AO while making the assessment. Even though the case is selected for limited scrutiny to examine the unsecured loans received by the assessee, it is not expected of the Id. AO to carry out 100% verification of receipt of unsecured loans by the assessee especially when the number of parties are huge. In the instant case, as stated earlier, the assessee had furnished the entire details called for by the Id. AO in the requisite tabular form. The Id. AO on perusal of the overall details furnished by the assessee in the tabular form and on the basis of independent verification carried out by him from seven parties u/s.133(6) of the Act on test check basis, was completely satisfied with the replies given thereon. Hence, it could be safely concluded that the Id.AO had indeed taken a possible view in the matter after carrying out the requisite enquiries. The law is very well settled that once the Id. AO takes a possible view on the matter, the same cannot be subjected to revision proceedings u/s.263 of the Act by the Id. PCIT. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd reported in 243 ITR 83; decision of the Hon'ble Jurisdictional High Court in the case of Nirav Modi reported in 390 ITR 292; and the decision of the Hon'ble Jurisdictional High Court in the case Garbriel India Ltd., reported in 203 ITR 108. In our considered opinion, the Id. PCIT is only trying to disturb the possible view taken by the ld. AO by merely making a bald allegation that no enquiries were carried out by the Id. AO. All the aforesaid facts clearly go to establish that adequate enquiries were indeed carried out by the Id. AO. Printed from counselvise.com ITA No. 100/LKW/2022 Page 22 of 37 7. Moreover, we find that in the show-cause notice dated 02/03/2022 issued by the Id. PCIT, there was no whisper of the Id. PCIT trying to invoke provisions of Explanation 2 to Section 263 of the Act which came into effect from 01/06/2015 onwards. However, the same is used by him only in the revision order passed u/s.263 of the Act. This goes to prove that the assessee was never given an opportunity to address the applicability of provisions of Explanation 2 to Section 263 of the Act during the course of revision proceedings before the Id. PCIT. Hence, in our considered opinion, applying the Explanation 2 to Section 263 of the Act would be bad in law in the facts and circumstances of the instant case. Reliance in this regard is placed on the decision of the Hon'ble Gujarat High Court in the case of PCIT vs. Shreeji Prints (P) Ltd., reported in 130 taxmann.com 293 (Guj) wherein it was held as under:- \"5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law.\" 7.1. It is pertinent to note that the Special Leave Petition preferred by the Revenue against the judgement of the Hon'ble Supreme Court is dismissed by the Hon'ble Supreme Court which is reported in 130 taxmann.com 294. Hence, applying the provisions of Explanation 2 to Section 263 of the Act in the instant appeal would be bad in law. 8. Moreover, the law is very well settled that revision jurisdiction u/s.263 of the Act could be initiated by the Id. PCIT only for 'lack of enquiry' and not for 'inadequate enquiry'. Reliance in this regard is placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd reported in 332 ITR 167. In the instant case, the Id. PCIT is only trying to conclude that the ld. AO had made inadequate enquiries. The law is further settled by the recent decision of the Hon'ble Gujarat High court in the case of PCIT vs. Shree Gayatri Associates reported in 106 taxmann.com 30 (Guj) wherein it was held as under:- \"3. We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision.\" 8.1. The Revenue preferred SLP against this order before the Hon'ble Supreme Court which was dismissed by the Hon'ble Apex Court which is reported in 106 taxmann.com 31. Similarly, the Hon'ble Jurisdictional High court in the case of PCIT vs. Canara Bank Securities Ltd., reported in 114 taxmann.com 514 (Bom) had also held the same view. The Revenue preferred SLP before the Hon'ble Supreme Court which is dismissed and the same is reported in 114 taxmann.com 545. 9. In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the Id. Printed from counselvise.com ITA No. 100/LKW/2022 Page 23 of 37 PCIT erred in invoking revision jurisdiction u/s.263 of the Act in the instant case and the same is hereby quashed. Accordingly, the grounds raised by the assessee are allowed. 10. In the result, appeal of the assessee is allowed. Ltd. 160 Pr. CIT vs. Clix Finance India (P) taxmann.com 357 (Delhi) Order dt. March 01, 2024. Section 37(1) of the Income-tax Act, 1961 Business expenditure - Allowability of (Loss on sale of loan portfolio) Assessment year 2010-11 - Assessee had sold loan portfolio in favour of a company and differential between value of financial receivables and consideration received from said company was sought to be claimed by assessee as loss on revenue account Assessing Officer being of view that assessee had not transferred loan facilities in totality made an addition Tribunal, however, had deleted impugned addition holding that transaction had taken place during year under consideration and loss had crystallized during year under consideration and, thus, assessee was entitled for claim of loss in year under Britannia Industries Ltd. vs. Pr. CIT 161 taxmann.com 705 (Kolkata-Trib.) Order dt. 06.03.2024 consideration itself Whether no question of law arose for consideration -Held, yes [Para 13] [In favour of assessee] 54.Section 263, read with section 143, of the Income-tax Act, 1961 Revision - Of orders prejudicial to interest of revenue (General) 2018-19 and Pr. Assessment year Whether where jurisdiction under section 263 had been invoked by Pr. Commissioner at instance of Assessing Officer Commissioner had failed to apply his mind objectively and record a finding of his own to conclude that due to certain discrepancies/omissions on part of Assessing Officer assessment so framed had been rendered erroneous in so far as prejudicial to interest of revenue, revisional jurisdiction exercised by Pr. Commissioner was bad in law Held, yes [Para 13.3] [In favour of assessee] II. Section 56, read with section 263, of the Income-tax Act, 1961-Income from other sources Chargeable as (Immovable property) Assessment year 2018-19 acquired had leasehold/freehold land and building from BDMC and had filed its return of income - Assessing Officer had passed an assessment order under section 143(3) -Pr. Commissioner was of view that provisions of section 56(2)(x) were applicable to acquisition of leasehold interest in land and building as well as freehold land parcel Accordingly, he assuming jurisdiction under section 263 remanded matter to Assessing Officer holding that assessment order was erroneous and prejudicial to interest of revenue - It was noted that assessee had furnished valuation reports before NFAC and NFAC had not referred matter to DVO for valuation Further, assessee had acquired leasehold/freehold land setting and building for up mega industrial unit which was eligible for several incentives under Government of Maharashtra's Package Scheme of Incentives-2013 Whether since assessee's claim was allowed by Assessing Officer after conducting necessary enquiry and application of mind, Pr. Commissioner was not justified in exercising revisionary jurisdiction under section 263 and setting aside assessment to Assessing Officer for fresh examination Held, Printed from counselvise.com ITA No. 100/LKW/2022 Page 24 of 37 yes Whether jurisdiction under section 263 is not available to Pr. Commissioner merely for restoring issue to file of Assessing Officer where he had not recorded any clear-cut finding as to how assessment was erroneous - Held, yes Whether, even otherwise, provisions of section 56(2)(x) were not applicable to acquisition of leasehold rights in land and building Held, yes [Paras 16, 17 and 18] [In favour of assessee] III. Section 43B of the Income-tax Act, 1961 Business disallowance Certain deductions to be allowed only on actual payment (Illustrations) - Assessment year 2018-19 Assessing Officer had passed an assessment order under section 143(3) allowing deduction claimed by assessee in respect of reversal/writing back of provision for liabilities under section 43B created in the earlier assessment years - Pr. Commissioner assuming jurisdiction under section 263 had restored issue to Assessing Officer treating assessment order as erroneous as well as prejudicial to interest of revenue - It was observed that assessee had not claimed deduction as an expense in year of creation of these provisions High in Pr. CIT v. Court [ITAT Eveready Industries India Ltd. No. 96 (Kol.) of 2017, dated 29-11- 2021] had held that statutory liabilities, which were earlier disallowed under section 43B were to be excluded and allowed as deduction in year of reversal/write back Whether, therefore, revisionary jurisdiction Commissioner exercised by Pr. invalid and, was therefore, order passed under section 263 could not be sustained - Held, yes [Para 20] [In favour of assessee] Pr. ITA CIT 3391/Del/2018 dt.08.01.2019. Arun Kumar Garg HUF vs. No. order This is assessee's appeal preferred against the order dated 12.03.2018 passed u/s 263 of the Income Tax Act, 1961 (hereinafter called 'the Act') by the Ld. Pr. C.I.T., Delhi-13 for assessment year 2013-14. The Ld. Pr.CIT, in the impugned order, has held that the not conduct Assessing Officer did inquiries/verification that he should have done before passing the original assessment order u/s 143(3) on 14.03.2016. It has been held by the Ld. Pr.CIT that the original assessment order is erroneous inasmuch as it is prejudicial to the interest of revenue. Vide the impugned order, the Ld. Pr. CIT has cancelled original Assessment year 2014-15 assessment and has directed the Assessing Officer to make fresh assessment after making proper inquiries with respect to certain suspicious transactions relating to long term capital gains on shares. 2.0 Brief facts of the case are that in this case the return of income was filed declaring total income at Rs.5,55,100/-. The case was selected for scrutiny under CASS and vide order dated 14.03.2016, the Assessing Officer accepted the returned income which included income from long term capital gains and income from other sources. Subsequently, a show cause notice was issued u/s 263 of the Act on 19.12.2017 by the Ld. Pr. CIT stating that the Assessing Officer did not make proper inquiries nor he investigated/verified the various details filed and even omitted issues specially with respect to suspicious transactions relating to long term capital gain in shares, rendering the assessment so made to be erroneous and prejudicial to the interest of the revenue. The assessee was asked to show cause as to why the original assessment order passed on 14.03.2016 u/s 143(3) of the Act not be revised. In response, the assessee submitted before the Ld. Pr.CIT that the assessee had filed all the requisite details and information regarding the nature and source Assessment year 2014-15 of capital gains along with documentary evidences during the course of assessment proceedings. It was submitted Printed from counselvise.com ITA No. 100/LKW/2022 Page 25 of 37 that the Assessing Officer had reached a conclusion after verifying and examining all the information and details and, therefore, the action of the Assessing Officer could not be the basis for initiating revisionary proceedings u/s 263 of the Act. However, the Ld. Pr.CIT was of the opinion that since the law had been amended and Explanation 2 had been introduced below section 263 which specified that the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the revenue if in the opinion of the Pr. Commissioner or the Commissioner, the order has been passed without making any inquiries or verification which should have been made by the Assessing Officer. The Ld. Pr.CIT was of the opinion that since the Assessing Officer had not carried out the investigation/inquiry which he should have, the order is to be deemed to be erroneous inasmuch as it is prejudicial to the interest of the revenue. The Ld. Pr.CIT proceeded to cancel the assessment and directed the Assessing Officer to frame fresh assessment after conducting appropriate inquiry. Aggrieved by Assessment year 2014-15 this order of the Ld. Pr.CIT, the assessee is now in appeal before the ITAT. 3.0 The Ld. AR submitted that it is not the case of the Ld. Pr.CIT that no inquiry was conducted by the Assessing Officer during the course of original assessment proceedings. He drew our attention to the copy of notice u/s 143(2) of the Act dated 24.09.2015 issued during the course of original assessment proceedings and also a copy of questionnaire dated 04.04.2015 wherein the Assessing Officer had required the assessee to submit details of and substantiate long term capital gain. Our attention was also drawn to copy of replies submitted to the Assessing Officer in this regard along with copies of ledger accounts of the assessee in the books of the share brokers along with contract notes and also copies of purchase bills of shares and share certificates to substantiate that all the transactions were genuine and had been duly inquired into by the Assessing Officer. It was also submitted by the Ld. AR that the Ld. Pr.CIT had not made any inquiries on his own but had directed the Assessing Officer to conduct inquiries which was against the law laid down by the Hon'ble Delhi High Court in the case of CIT vs. Goetze India Ltd. reported in 361 ITR 505 (Del). It was also Assessment year 2014-15 submitted that the insertion of Explanation 2 to section 263 of the Act was prospective in nature and, therefore, would not apply in assessment year 2014-15. 4.0 In response, the L.d. CIT DR vehemently supported the order of the Ld. Pr.CIT and submitted that since the Assessing Officer had not made any inquiry regarding the long term capital gains, the exercise of revisionary jurisdiction by the Ld. Pr.CIT was justified. The Ld. CTI DR also placed reliance on the following case laws to support her contention that the action of the Ld. Pr.CIT in invoking the provisions of section 263 of the Act was justified:- 1. Malabar Industrial Co. Ltd. vs. CIT Supreme Court 2000, 109 Taxman 66 2. CIT vs. Ashok Logani, Delhi High Court, 2011, 11 taxmann.com 208 3. Surya Jyoti Software Pvt. Ltd. vs. PCIT, ITAT Delhi, 2017, ITA No. 2158/Del/2017 Printed from counselvise.com ITA No. 100/LKW/2022 Page 26 of 37 4. Surya Financial Services Ltd. vs. PCIT, ITAT Delhi 2018, 2018-TIOL-74- ITAT-DEL 5.0 We have heard the rival submissions and perused the material available on record. From the records produced before us, it is very much evident that the Assessing Officer had made Assessment year 2014-15 detailed inquiries regarding the assessee's claim of long term capital gain and, thereafter, after considering the reply submitted by the assessee, the Assessing Officer had made further inquiries also which is evident from the copy of questionnaire as well as the reply thereto which has been placed in the Paper Book filed by the assessee before us. Thus, in view of the documentary evidences as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had applied his mind to the issue of long term capital gains and it was only after having been satisfied with the correctness of the claim that he accepted the return filed by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assessing Officer while accepting the claim of the assessee and, therefore, the contention of the Ld. Pr.CIT that no inquiry was made by the Assessing Officer is factually incorrect. It is not the case where no inquiry has been made by the Assessing Officer. Merely because the Ld. Pr. CIT felt that further inquiry should have been made does not make the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue. 5.1 It is further seen that the assessee had made detailed submissions before the Ld. Pr.CIT in response to the notice u/s 263 of the Act stating that all the issues raised by the Ld. Pr. CIT had been duly examined by the Assessing Officer during the course of assessment. However, the Ld. Pr.CIT has ignored the replies of the assessee and he has not discussed as to why he does not agree with the contentions of the assessee. The Ld. Pr.CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr.CIT although it was incumbent upon him to make such inquiry so as to reach the conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue, 5.2 The Hon'ble Delhi High Court in the case of Pr.CIT vs. Delhi Airport Metro Express Pvt. Ltd. in ITA No.705/2017 has categorically held that for the purpose of exercising jurisdiction u/s 263 of the Act and reaching a conclusion that the order is erroneous in so far as being prejudicial to the interest of the revenue, the CIT has to make some minimal inquiry and where the CIT is of the view that the Assessing Officer had not undertaken any inquiry, it becomes incumbent upon the CIT to conduct such inquiry. We are afraid that in the present case the Ld. Pr.CIT has not conducted any such inquiry. Assessment year 2014-15 5.3 Further, the Hon'ble Delhi High Court in the case of Pr.CIT vs. Modicare Ltd. in ITA 759/2017 has held that the exercise of jurisdiction u/s 263 of the Act cannot be outsourced by the Ld. Pr.CIT to the Assessing Officer and therefore, the Ld. Pr.CIT cannot direct the Assessing Officer to provide details of the facts on the basis of which proceedings u/s 263 could have been initiated. 5.4 In the present case, it is apparent that the Ld. Pr.CIT, unmindful of the inquiries conducted by the Assessing Officer during the course of assessment proceedings and the submissions made by the assessee in response to notice u/s 263 of the Act, has merely observed that the assessment order was passed without making proper inquiries and it is a matter of record that the Ld. Pr.CIT has himself not undertaken any Printed from counselvise.com ITA No. 100/LKW/2022 Page 27 of 37 inquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of the revenue. 5.5 We may further add that there is a difference between lack of inquiry and inadequate inquiry and it is for the Assessing Officer to decide the extent of inquiry to be made and it is his satisfaction which is required under the law. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Assessment year 2014-15 Sunbeam Auto Ltd reported in (2010) reported in 332 ITR 167 (Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr.CIT cannot pass the order u/s 263 on the ground that thorough inquiry should have been made by the Assessing Officer. 5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined of assessment during the course proceedings. The Mumbai ITAT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Rane vs. ПО reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon'ble Delhi High Court, according to which the Commissioner has to conduct the inquiry and verification to establish and show that the Assessment year 2014-15 assessment order was unsustainable in law. The ITAT Mumbai Bench has further held that the intention of the legislature could not have been to enable the CIT to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the ITAT Mumbai Bench in the case of M/s Indus Best Hospitality & Realtors Pvt. Ltd. in ITA No. 3125/Mum/2017 vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is retrospective in nature. Since the year under consideration is AY 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar view has been taken by the various Coordinate Benches of the ITAT in the following cases:- (a) AV Industries v. ACIT [ITA No. 3469/Mu m/2010] dated 06.11.2015 (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 (c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017. Printed from counselvise.com ITA No. 100/LKW/2022 Page 28 of 37 (d) Shantikrupa Estate Pvt. Ltd. [IT'A No. 1252/Ahd/2015] dated 09.09.2016 (e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017. 5.8 Accordingly, respectfully following the ratio of the various judgments as referred to in the preceding paragraphs, we have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of the Act and we have no option but to quash the same. It is so ordered accordingly. 6.0 In the result, the appeal of the assessee stands allowed. [2024] 159 taxmann.com 347 (Rajkot - Trib.) Kutch District Co-op. Milk Producers' Union Ltd. Section 80P, read with section 263, of the Income-tax Act, 1961 - Deductions - Income of co-operative societies (Revision) Assessment year 2017-18 operative society filed return of income and Assessee co- assessment was completed under section 143(3) accepting returned income - Principal Commissioner observed that assessee having received interest income from cooperative banks, interest income was required to be taxed and benefit of deduction claimed by assessee society under section 80P(2)(d) should have been disallowed However, Officer while Assessing completing assessment had not examined facts of case and issue under consideration, therefore, Principal Commissioner held that said order was erroneous as well as prejudicial to interest of revenue - However, it was found that Assessing Officer had made due enquiries with respect to details of interest received from cooperative banks by assessee on which deduction under section 80P was claimed during course of assessment proceedings and had taken a view, which was a legally possible view Whether therefore, Principal Commissioner could not have resorted to section 263 proceedings only to supplant his own view with view taken by Assessing Officer -Held. yes Whether Principal Commissioner had also factually erred in observing that there was no enquiry by Assessing Officer on this aspect Held, yes Whether thus, order passed by Principal Commissioner under section 263 was liable to be set aside - Held. yes [Para 13] [In favour of assessee] 37. [2024] 160 taxmann.com (Ahmedabad - Trib.) Gujarat Energy Transmission Corporation Ltd. vs.Principal Commissioner of Income-tax 1039 Section 194C, read with sections 40(a)(ia) and 263, of the Income-Tax Act, 1961 - Deduction of tax at source Contractors/sub- contractors, payments to (Revision) Assessment year 2010-11 Assessee, a Government of Gujarat undertaking, was engaged in transmission of power Assessing Officer passed assessment order under section 143(3) Subsequently, Principal Commissioner observed that assessee had credited payments to accounts of contractors without deduction of tax al source He thus invoked revisionary proceedings and directed Assessing Officer to invoke provisions of section 40(a)(ia) and disallow the impugned payment made to these two contractor - Assessee contended that said contractors were listed in annexure furnished during assessment Printed from counselvise.com ITA No. 100/LKW/2022 Page 29 of 37 proceedings, however, it was a clerical error as payments were actually made in subsequent financial year and TDS was deducted on same - It was noted that assessee had demonstrated that invoices were raised and payments were mentioned parties during subsequent financial year, for which TDS was duly deducted and remitted to Government Whether since details furnished indicated that work carried out by two parties was quantified and crystalized during subsequent year and genuine admission of assessee of inadvertently including names of aforementioned parties in list of entities with no TDS deduction, made to Held, had hat there on this order which was duly recognized by Assessing Officer during framing of assessment under section 143(3), there was no justifiable ground for Principal Commissioner to invoke power under section 263 - Held, yes [Paras 9 and 10] [In favour of assessee] 2024] 159 taxmann.com 29 (Delhi - Trib.) Vaaan Infra (P.) Ltd. v. Principal Commissioner of Income-tax Section 56, read with section 263, of the Income-tax Act, 1961 and rule 11UA of the Income-tax Rules, 1962-Income from other sources - Chargeable as (Share, valuation of) Assessment year 2015-16 Assessee's case was selected for scrutiny where one reason for selection was large share premium received during relevant assessment year -However, Assessing Officer passed assessment by making disallowance under section 36(1)(va) on account of late payment of ESI/PF Principal Commissioner observed that Assessing Officer had made no enquiry with respect to valuation of shares and merely accepted assessee's claim of share premium He, thus, passed revision order setting aside assessment - It was noted that assessee had produced valuation report prepared under rule 11UA Also a notice under section 142(1) was issued wherein assessee was specifically asked questionnaire on said issue - Whether since assessee had already produced all details in respect of issue of large share premium received during year under consideration at time of original assessment proceedings itself which had been already dealt by Assessing Officer, order of revisional authority was to be set aside Held, yes [Para 9] [In favour of assessee] [2024] 162 taxmann.com 759 (Delhi - Trib.) Ahlcon Parenterals (India) vs Commissioner of Income-tax. Ltd. Section 263 of the Income-tax Act, 1961 Revision - Of orders prejudicial to interest of revenue (Proposal of AO) - Assessment year 2015-16 Assessing Officer made two additions in hands of assessee Principal Commissioner issued notice under section 263 It was noted that contents of notice were similar to proposal of Assessing Officer which was based on audit report - Whether since on basis of audit objections and proposal only, jurisdiction under section 263 was invoked and exercised by Principal Commissioner to hold assessment order to be erroneous, it established non-application of independent mind and, thus, impugned order was to be set aside - Held, yes [Para 10] [In favour of assessee] (Kolkata - Trib.) [2024] 163 taxmann.com 574 Rajesh Kumar Jalan vs. Principal Commissioner of Income-tax. Section 68, read with section 263, of the Income-tax Act, 1961 Cash credit (Revision) Assessment year 2015-16 and 2016-17 Assessee engaged in trading of cloth, filed his return under section 44AD -On basis of Printed from counselvise.com ITA No. 100/LKW/2022 Page 30 of 37 information from Bureau of Investigation, Commercial taxes, that there were certain deposits in bank account of assessee in name of his proprietary concern, Assessing Officer reopened assessment in both assessment years - Assessee submitted that he had not opened any of Bank accounts and that might have been done by some unknown person by using fake identity of assessee - Assessing Officer was not satisfied with submissions of assessee and he was of view that said sum was to be treated as unaccounted sales of assessee and he assumed this figure as turnover of assessee and estimated profit at 8% and estimated unexplained investment - Appeal was filed against said assessment order - Meanwhile, Additional Commissioner forwarded a proposal to CIT for initiating proceedings under section 263 against assessee issued a notice under section 263 and observed that alleged credit of sales ought to be treated as unexplained cash credit against name of assessee and Assessing Officer had erred in treating it as a gross turnover CIT vs. Uma Glass Works vs. PCIT, ITA No. 17&18/Agra/2021, ΠΑΤ Delhi \"DB\" Bench, Delhi. Whether since Commissioner had just reproduced proposal sent by Additional CIT and there was no independent application of mind at his end for taking cognizance under section 263, order passed under section 263 was to be quashed, particularly when said issue was pending in appeal before Commissioner (Appeals) - Held, yes [Paras 21 to 23] [In favour of assessee] 24. We also further observe from the order of the Ld. PCIT the assessment order passed by the Assessing Officer was held to be erroneous and prejudicial to the interest of the Revenue stating that the AO has not made enquiries. The Ld. PCIT is also of the view that the difference in closing stock should have been added as income u/s 68 of the Act. 25. In so far as the AO not making enquiries in the course of assessment proceedings are concerned as we have already noted above that it is the categorical finding of the AO in para 5 page 6 of assessment order that in the course of assessment proceedings the assessee was required to explain the difference in closing stock and the assessee has furnished charts, reconciliation statement, explanations etc., which was examined by the AO and decision was taken to treat the difference in opening stock, purchases, sales, closing stock, GP/net profit as income of the assessee. Therefore, the observations of the Ld. PCIT that the AO has not carried out any enquiries are not borne out from record. We also observe that the Ld. PCIT having observed that the AO has not made an enquiry the Ld. PCIT failed to point out any deficiency in enquiries and also not made any minimal enquiry by himself to prove that the order passed by the erroneous and Assessing Officer is prejudicial to the interest of Revenue. 26. The Hon'ble Delhi High Court in the case of DIT Vs. Jyoti Foundation held that where revisionary authority opined that further enquiry was required such enquiry should have been conducted by revisionary authority himself to record a finding that the assessment order passed by the AO was erroneous and prejudicial to the interest of Revenue. In the case on hand before us enquiries were certainly made by the Assessing Officer as observed above and it is not a case of no enquiry at all. In view of the decision of the Hon'ble Delhi High Court in the case of DIT vs. Jyoti Foundation (supra), we hold that the Ld. PCIT should not have set aside the assessment order and directed the Assessing Officer to conduct enquiry. Printed from counselvise.com ITA No. 100/LKW/2022 Page 31 of 37 27. In view of what is discussed above, we hold that the assumption of jurisdiction u/s 263 by the Ld. PCIT is bad in law and accordingly the order of the Ld. PCIT is set aside. Pr. CIT vs. Delhi Airport Metro Express Pvt. Ltd. ITANo. 705/2017 Order dt. 05.09.2017 10. jurisdiction under Section 263 of the Act, the For the purposes of exercising conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that \"in the case of the Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue\". 11. In the considered view of the Court, this can hardly constitute the reasons required to be given by the PCIT to justify the exercise of jurisdiction under Section 263 of the Act. In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by the Assessee out of its own funds during the AY in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the PCIT. 12. Mr. Ashecsh Jain then volunteered that the PCIT had exercised the second option available to him under Section 263 (1) of the Act by sending the entire matter back to the AO for a fresh assessment. That option, in the considered view of the Court, can be exercised only after the PCIT Download Source- www.taxguru.in undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case. 13. Therefore, the Court is of the view that the ITAT was not in error in setting aside the impugned order of the PCIT under Section 263 of the Act. No substantial question of law arises Sharnam Realities Pvt. Ltd. vs. Pr. CIT [2024] 161 437 (Ahd. taxmann.com ITAT) Full value of Section 43CA, read with section 263, of the Income-tax Act, 1961 consideration for transfer of assets other than capital assets in certain cases (Revision) Assessment year 2015-16 Whether where assessee had sold a property, only authority given under section 43CA to Assessing Officer (revenue authorities) is to substitute actual sale consideration with stamp duty valuation where latter exceeds former and there is no scope for questioning stamp authorities valuation of property - Held, yes - Principal Commissioner having noted that Assessing Officer had not looked into mistake in valuation of property sold by assessee by stamp duty authorities restored matter back to Assessing Officer with specific directions for examination on this aspect - Whether since in terms of provisions of section 43CA above aspect was clearly beyond scope of powers of Assessing Officer, there was no question of Assessing Officer Printed from counselvise.com ITA No. 100/LKW/2022 Page 32 of 37 being in error for not having examined same and thus order passed by Principal Commissioner deserved to be set aside Held, yes [Paras 22 and 24] [In favour of assessee] Pr. CIT vs. Mukesh Chand Mal Pitti R/Tax Appeal No. 507 of 2023 High Court Gujrat at Ahmedabad. 3. Facts in brief indicated that the assessee was an individual on income from salary. The case of the petitioner was taken up for scrutiny under CASS for verifying the reasons for \"cash deposits during demonetization period\". Pursuant proceedings under sec.143 of the Income-tax Act, and on satisfaction thereof, assessment order was passed. 3.1 It appears that in exercise of powers under Sec.263 of the Income-tax Act, the Office of the Principal Commissioner of Income Tax, took up the issue for revision. In the perception of the CIT, the Assessing Officer had not examined the sources of cash in hand and that the possibilities of introducing unaccounted income could not be ruled out. It was the case of the revisional authority that in failing to examine and compare the figures of cash deposits made by the assessee in the corresponding period of the preceding year, to judge the genuineness of the cash deposits, the Assessing Officer ought to have compared the figures of the cash deposits made in the demonetization period with the rest period of the year under consideration. 3.2 On the respondent carrying the matter further in appeal to the Income- tax Appellate Tribunal, the Tribunal, after examining the question of law and referring to various decisions on the scope of inquiry under sec.263(A) of the Act, held as under: \"6.9 Now coming to the facts before us, from the records we observe that the issue regarding the cash deposited by the assessee during the demonetization period has been discussed in detail during the course of assessment proceedings. The assessment proceedings were initiated specifically for the reason \"verifying the cash deposited during demonetization period\". Accordingly, the AO issued notice for verifying the cash deposits made by the assessee, in response to which the assessee furnished the details which have been mentioned in the preceding paragraphs. Therefore, this is not a case where no enquiry was made by the AO during the course of assessment proceedings. Further, we also observe that the assessee also duly filed his reply in response to the notice issued by the AO and various details like Certificates from Lakshmi Vilas bank and Certificate from Allahabad Bank, bank statements of Lakshmi Vilas Bank and Allahabad Bank, cash book for financial year 2016-17, VAT returns for financial year 2016-17 etc were submitted before the AO in response to this query regarding the cash deposits made by the assessee during the demonetization period. We further observe that it is also not the case of the Principal CIT that the AO has taken a view which is legally impermissible. Therefore, from the above facts, we are of the considered view that the AO had made enquiries into the aspect of cash deposit in the bank accounts of the assessee during demonetization period, and after due consideration of the assessee and did not make any addition to the returned income. Accordingly, in our view, this is not a case where no enquiry has been made by the Assessing Officer during the course of assessment proceedings. In our view, Pr.CIT has incorrectly observed in the instant facts that the Ld. AO failed to apply his mind to the issues on hand or he had omitted to make Printed from counselvise.com ITA No. 100/LKW/2022 Page 33 of 37 enquiries altogether or had taken a view which was not legally plausible in the instant facts. As hely by various Courts, Principal CIT cannot in 263 proceedings set aside an assessment order merely because he has different opinion in the matter. In our view, s.263 of the Act does not visualize a case of substitution of the judgment of the Principal CIT for that of the Assessing Officer who passed the order unless the decision is held to be wholly erroneous. As noted in various judicial precedents highlighted above, the Principal CIT, 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-visit the entire assessment and determine the income himself at a higher figure.\" 3.3 Perusal of the order would indicate that the Income-tax Appellate Tribunal and in our opinion rightly came to the conclusion that since the assessment proceedings were specifically undertaken for the reason of verifying the cash deposits during the demonetization period, it was not the case where no enquiry was made by the A.O the course of assessment during proceedings. 3.4 Perusal of the order and reasons would indicate that these are finding of facts arrived at by the Tribunal. Having found that in response to the notice issued by the A.O, details were supplied such as Certificates from the Lakshmi Vilas Bank, certificate from the Allahabad Bank, Bank Statements of the banks concerned, cash books for the financial year 2016-17 etc., based on which the A.O had taken a decision, the Income- tax Tribunal allowed the appeal of the assessee. 4. We find no reason to interfere with the impugned order and the appeal is accordingly, dismissed. Narayan Tatu Rane vs. ITO, [2016] 70 taxmann. Com 227 (Mum.Trib) Section 263 of the Income-tax Act, 1961 Revision - Of orders prejudicial to interest of revenue (Explanation 2(a) to section 263) Assessment years 2007-08 and 2008-09 Whether newly inserted Explanation 2(a) to section 263 does not 49uthorize or give unfettered powers to Commissioner to revise each and every order, if in his opinion, same has been passed without making enquiries or verification which should have been made Held, yes On basis of documents unearthed during search at third party premises indicating payments made to persons holding public office, assessments of assessee were reopened for both years Assessee had denied any connection with incriminating document - Assessing Officer was satisfied with said explanation and, accordingly, did not make any addition to total income in both years Placing on amendment made in Explanation 2(a) to section 263, Commissioner revised said order Whether since Commissioner had not brought any material on record to substantiate his inference, Commissioner Sir Ratan Tata Trust vs. Dy. CIT (Exemption Circle 2(1), Mumbai [2020] 122 taxmnn. Com 273 (Mum. Trib.) had passed impugned revision orders only to carry out fishing and roving enquiries with objective of substituting his views with that of Assessing Officer - Held, yes [Para 21] [In favour of assessee/Matter remanded] Section 263 of the Income-tax Act, 1961 Revision - Of orders prejudicial to interest of revenue (Explanation 2(a) to section 263) Assessment years 2007-08 and 2008-09 Whether newly inserted Explanation 2(a) to section Printed from counselvise.com ITA No. 100/LKW/2022 Page 34 of 37 263 does not 50uthorize or give unfettered powers to Commissioner to revise each and every order, if in his opinion, same has been passed without making enquiries or verification which should have been made Held, yes On basis of documents unearthed during search at third party premises indicating payments made to persons holding public office, assessments of assessee were reopened for both years Assessee had denied any connection with incriminating document Assessing Officer was satisfied with said explanation and, accordingly, did not make any addition to total income in both years Placing on amendment made in Explanation 2(a) to section 263, Commissioner revised said order Whether since Commissioner had not brought any material on record to substantiate his inference, Commissioner had passed impugned revision orders only to carry out fishing and roving enquiries with objective of substituting his views with that of Assessing Officer - Held, yes [Para 21] [In favour of assessee/Matter remanded] CIT vs. Vam Resorts & Hotels Pvt. Ltd. Allahabad High Court, ITA No. 107 of 2015 Order dated 20.08.2019 CIT vs. M/S Krishna Capbox(P) Ltd., Allahabad High Court, ITA No. 01 of 2015 Order dated 23.02.2015 Pr. CIT vs. Universal Music India Pvt. Ltd. Bombay High Court, ITA No. 238 of 2018 Order dated 19.04.2022 Smt. Kanta Rani vs. Pr.CIT ITAT Chandigarh bench, ITA No. 446/Chd/2022 Order dated 20.02.2023 Shri Dheeraj Singh Sisodiya PCIT(Central) ITAT VS. Jaipur, ITA No. 132/JP/2022 Order dated 10.08.2022 Reliance Payment Solutions Limited vs. Pr. CIT, ITAT Mumbai bench, ITA No. 1010/MUM/2021 dated 21.03.2022 Order Model Exim (Central), VS. PCIT ITA No. 137/LKW/2022 Order dated 05.11.2024.” (B.1.2) Moreover, an index of case laws relied upon by the assessee was also filed from the assessee’s side, containing the following particulars: - Printed from counselvise.com ITA No. 100/LKW/2022 Page 35 of 37 (B.3) A second compilation of case laws relied upon by the assessee was also filed from the assessee’s side, in the course of appellate proceedings in ITAT, containing the following particulars: - (C) At the time of hearing, the Ld. Counsel for the assessee also filed a copy of the order of the Hon’ble Gujarat High Court in the case of PCIT-1 vs. Mukesh Chand Mal Pitti (order dated 29.08.2023 in R/Tax Appeal No. 507 of 2023). (C.1) In his oral submissions, at the time of hearing, the Ld. Counsel submitted that the Assessing Officer had passed the assessment order dated 15.12.2019 after carrying out all necessary inquiries. He took us through the paper book referred to in foregoing paragraph no. (B.1) of this order and further he placed reliance on the decided precedents as referred to the preceding paragraphs (B.1.1), (B.1.2) and (B.3) of this order. He contended, based on aforesaid submissions that the opinion expressed by the Ld. PCIT (in the order dated 21.02.2022 passed under section 263 of the Act) that the Assessing Officer had not examined or inquired into the relevant facts is patently incorrect in the facts and circumstances of the present case. The Ld. Printed from counselvise.com ITA No. 100/LKW/2022 Page 36 of 37 Departmental Representative relied on the aforesaid order dated 21.02.2022 of the Ld. PCIT. (C) We have heard both sides. We have perused the materials available on record. The paper book filed by the assessee, as referred to in paragraph no.(B.1) of this order, contains the details furnished by the assessee in response to the various notices issued by the Ld. Assessing Officer. Upon perusal of the same, we are satisfied that the Assessing Officer conducted all relevant inquiries necessary in the facts and circumstances of the case, having due regard to the nature and scale of the assessee’s business and other pertinent factors. Accordingly, we concur with the submissions of the Ld. Counsel for the assessee that the opinion expressed by the Ld. PCIT (that the Assessing Officer had not examined or inquired into the relevant facts) is factually incorrect in the present case. In view of the above, we set aside the impugned order u/s 263 of the Act and restore the aforesaid assessment order dated 21.02.2022. The appeal of the assessee is allowed. All the grounds of appeal are treated as disposed off in accordance with the aforesaid order. In the result, for statistical purposes, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 11/12/2025. Sd/- Sd/- [SUBHASH MALGURIA] [ANADEE NATH MISSHRA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11/12/2025 Vijay Pal Singh, (Sr. PS) Printed from counselvise.com ITA No. 100/LKW/2022 Page 37 of 37 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard file By order //True Copy// Printed from counselvise.com "
Other Referred Cases
CIT vs. Rangila Ram and Others, PCIT v. Chamundi Winery and Distillery, CIT vs. Ram Singh and Others, Trilok Chand Girdharilal and Party, CIT vs. Meerut Roller Flour Mills Ltd., Ram Pyari Deri Saraogi v/s CIT, Smt Tara Devi Agarwal v/s CIT, Gee Vee Enterprises v/s Addl.CIT, Malabar Industrial Co. Ltd. vs. CIT, Gabriel India Ltd. vs. CIT, Max India Limited vs. CIT, Sunbeam Auto Ltd. vs. CIT, Dg. Housing Projects Ltd. vs. ITO, M/s Subhash Jaiswal Associates vs. PCIT, Shri Devinder Singh Kalyan vs. Subhash Jaiswal Associates
Laws Referred To
Income Tax Act, 1961
1:1 Consultation on Tax Litigation
₹0
1:1 Consultation on FEMA Compliance
₹1
Guide to Charitable Trusts: Formation, Benefits, and Compliance
₹0
Assignment of Registered Trademark
Mehul₹500
Object Clause - Merchant Banking Business
Mehul₹100
From Endless Revisions to Timely Compliance: The New Era of TDS/TCS Rectification
Team Counselvise - January 30, 2026
Minimum Alternate Tax (MAT): Comprehensive Overview and Key Changes under Finance Bill, 2026
Team Counselvise - February 06, 2026
Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals
Team Counselvise - February 06, 2026