Commissioner Of Income Tax, Jaipur-Iii, Jaipur v. Shri Rajiv Arora, F-62, Epip, Sitapura Industrial Areajaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 1. D.B. Income Tax Appeal No. 283 / 2010 COMMISSIONER OF INCOME TAX, JAIPUR-III, JAIPUR ----Appellant Versus SHRI RAJIV ARORA, F-62, EPIP, SITAPURA INDUSTRIAL AREAJAIPUR ----Respondent Connected With 2. D.B. Income Tax Appeal No. 13 / 2011 COMMISSIONER OF INCOME TAX, JAIPUR-III, JAIPUR ----Appellant Versus SHRI RAJIV ARORA, F-62, EPIP, SITAPURA INDUSTRIAL AREA JAIPUR ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sameer Jain For Respondent(s) : Mr. Anuroop Singhi _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGHJudgment 28/08/2017 1.In both these appeals, since similar question of law and factsare involved, they are decided by this common judgment. 2.By way of these appeals, the appellant has challenged thejudgment and order of the tribunal whereby the tribunal hasallowed the appeal of the assessee against the order passed underSection 263 of the Income Tax Act. 3.This court while admitting the matter has framed following substantial questions of law:- D.B. ITA No. 283/2010 & 13/2011. “Whether assessment order contrary to provision ofSection 143(3) i.e. scrutiny assessment can not besupervised under revisionary powers given u/s 263 of theAct when income to the tune of Rs.20 crore approximatelyis neither examined or verified by the Assessing Officerimmediately before his retirement?” 4. He contended that from the order of A.O. it was very clearthat the file was transferred vide letter No. 249 dated 20.10.2008and assessment order was passed within a week withoutexamining the matter and without considering the relevantmaterial which was required to be considered and he has alsotaken us to the order of A.O. and contended that the order passedby the A.O. is without any reasons and in fact the assessmentorder is passed without any evidence. In that view of the matter,the CIT(A) has taken into consideration provisions of Section 263of the Income Tax Act and passed the order. He contended thatthe six points which have been raised by the CIT(A) reads asunder: 1. The AO did not examine quantitative details ofmanufacturing/exporting goods. 2. The nature of payment made to following partieshave not been examined.have not been examined. 1. LawatRs.1,30,54,500/- 2. Kiran JewellersRs.3,99,31,437/- 3. Single bill 1010000661Rs.1,15,00,000/- 4. Rajiv Arora(Individual)Rs.2,39,12,417/- 5. Murti Corpn, MumbaiRs.10,06,500/- 6. Amrapali JewellerRs.1,65,00,000/- 3. The assessee has shown purchases from localsuppliers. Perusal of the record revealed that noverification of such purchases have been made beforepassing the order. The BCTT Wing of the Department carried survey in several cases. The persons surveyedadmitted issue of bills without delivery of goods byproviding accommodation entries which are includedin the list of suppliers to the assessee. Besides thisthe Investigation Wing of the Department duringsearch in the case of Sanjeev Prakashan, Moti SonsGroup, Bardia Group etc. also detected severalpersons issuing bills without delivery of goods. Thename of such suppliers also appeared in the list ofpurchases made by the assessee. An illustration ofa few such persons is made here under:- Sr. No.Name of SuppliersAmount in Rs.1Aayush Enterprises51,888/-2Abhay International8,03,335/-3Ash. Exports6,01,442/-4Bright Stones12,22,553/-5Gaurav Exports2,15,624/-6Jodhpur Gems66,825/-7Riddhi Siddhi Jewellers2,20,877/-8Selective Gems74,571/-9Shyam International5,00,300/-10S.P. Jewellers60,028/- The AO has neither called for any confirmation ofthe supplier nor verified any Purchases during theproceedings. Sr. No.Name of SuppliersAmount in Rs.1Aayush Enterprises51,888/-2Abhay International8,03,335/-3Ash. Exports6,01,442/-4Bright Stones12,22,553/-5Gaurav Exports2,15,624/-6Jodhpur Gems66,825/-7Riddhi Siddhi Jewellers2,20,877/-8Selective Gems74,571/-9Shyam International5,00,300/-10S.P. Jewellers60,028/- The AO has neither called for any confirmation ofthe supplier nor verified any Purchases during theproceedings. 4. The assessee has made investment in mutualfunds. Unit of several mutual funds have beenredeemed during the period under consideration atloss. The AO has not examined the angle ofdividend stripping as per provision of section 94(7)of the income-tax Act. 5. In the balance sheet and as per details filedduring proceedings in respect of investment madein immovable properties by the assessee, thesource of investment has neither been examinednor has the investment made been examined withthe angle of determination of net wealth of theassessee. 6. The assessee has substantial interest in M/sAmrapali Jewels Pvt. Ltd. and has advancedsubstantial amount of loan. The nature of relation of assessee with this concern was not examined bythe AO. The arrangement of business transactionsbetween the two concerns in a manner thatincreases the eligible profit of the concern of theassessee and reduces the profit of the saidcompany in terms of section 10B(7) of the IT Act,1961 has not been examined. 5.He has contended that after considering the reply, the CIT (A) has passed the following order:- 8. I have examined the written submission of theassessee vis-a-vis assessment record in the caseof the assessee. The details available on ordersheet revealed that the AO reaised queries on28.5.2008 and 26.08.08 without original record ofassessee available on his file. The case wastransferred to him by ACIT, Circle-7, Jaipur on20.10.2008 and a fresh notice u/s 143(2) of theAct was again issued by on that date. No freshquery letter was issued after receipt of originalrecord but the details pending on earlier routinequeries were accepted. The AO has passedassessment order accepting returned incomewithout discussing any of the issues mentionedabove. The details made available by the assesseewere not examined by the AO and noinvestigation was made. The issues raised in thenotice u/s 263(1) of the Act referred to abovewere replied by the assessee but none of theissue was examined by the AO during the courseof assessment proceedings.assessee vis-a-vis assessment record in the caseof the assessee. The details available on ordersheet revealed that the AO reaised queries on28.5.2008 and 26.08.08 without original record ofassessee available on his file. The case wastransferred to him by ACIT, Circle-7, Jaipur on20.10.2008 and a fresh notice u/s 143(2) of theAct was again issued by on that date. No freshquery letter was issued after receipt of originalrecord but the details pending on earlier routinequeries were accepted. The AO has passedassessment order accepting returned incomewithout discussing any of the issues mentionedabove. The details made available by the assesseewere not examined by the AO and noinvestigation was made. The issues raised in thenotice u/s 263(1) of the Act referred to abovewere replied by the assessee but none of theissue was examined by the AO during the courseof assessment proceedings. 6. Counsel for the appellant has also taken us to the order of the Tribunal and contended that the Tribunal 11 observed as under:- 6. Counsel for the appellant has also taken us to the order of the Tribunal and contended that the Tribunal 11 observed as under:- 11. Even the CIT conceded the position that theopinion of the A.O. made the enquiries, elicitedreplies and there after passed the assessment order.The grievances of the CIT was that the A.O. shouldhave made further enquiry rather than accepting theassessee’s explanation. Therefore it could not besaid that it was a case of lack of enquiry as statedabove no where the CIT had concluded that opinionof the A.O. was clearly erroneous. Accordingly we hold that order passed u/s263 was only on accountof change opinion as it could not establish that howthe order of the A.O. is erroneous and prejudicial tothe interest of revenue. Therefore the order of theCIT u/s 263 is set aside and the order of the A.O.passed originally is restored.” 7.It is contended that the Tribunal has allowed the appeal without considering the reasoned order given by the CIT(A),therefore, he contended that in view of the provisions of Section263, the order passed by the AO was prejudicial to the interest ofthe revenue and the Tribunal has seriously committed an error inupholding the order of A.O. and reversing the view taken byCIT(A) under Section 263. 8.Counsel for the appellant has relied upon the decision ofSupreme Court in Malabar Industrial Co. Ltd. Vs. Commissioner ofIncome Tax, Kerala State (2000) 2 SCC 718 wherein it has beenheld as under:- 5. To consider the first contention, it will beapt to quote section 263(1) which isrelevant for our purpose : "263. Revision of orders prejudicial torevenue - (1) The Commissioner may callfor and examine the record of anyproceeding under this Act, and if heconsiders that any order passed therein bythe assessing officer is erroneous insofaras it is prejudicial to the interests of therevenue, he may, after giving the assesseean opportunity of being heard and aftermaking or causing to be made such inquiryas he deems necessary, pass such orderthereon as the circumstances of the casejustify, including an order enhancing ormodifying the assessment, or cancellingthe assessment and directing a freshassessment. 7. There can be no doubt that the provisioncannot be invoked to correct each andevery type of mistake or error committedby the assessing officer, it is only when anorder is erroneous that the section will beattracted. An incorrect assumption of factsor an incorrect application of law willsatisfy the requirement of the order beingerroneous. In the same category fall orderspassed without applying the principles ofnatural justice or without application ofmind. 11. In the instant case, the Commissionernoted that the Income Tax Officer passedthe order of nil assessment withoutapplication of mind. Indeed, the High Courtrecorded the finding that the Income TaxOfficer failed to apply his mind to the casein all perspective and the order passed byhim was erroneous. It appears that theresolution passed by the Board of theappellant-company was not placed beforethe assessing officer. Thus, there was nomaterial to support the claim of theappellant that the said amount representedcompensation for loss of agriculturalincome. He accepted the entry in thestatement of the account filed by theappellant in the absence of any supportingmaterial and without making any inquiry.On these facts the conclusion that theorder of the Income Tax Officer waserroneous is irresistible. We are, therefore,of the opinion that the High Court hasrightly held that the exercise of thejurisdiction by the Commissioner undersection 263(1) was justified. 9. He also relied on the decision of Calcutta High Court in Commissioner of Income Tax, Central-I, Kolkata Vs. MaithanInternational, (2015) 56 Taxmann.com 283 (Calcutta) wherein ithas been held as under:- 9. He also relied on the decision of Calcutta High Court in Commissioner of Income Tax, Central-I, Kolkata Vs. MaithanInternational, (2015) 56 Taxmann.com 283 (Calcutta) wherein ithas been held as under:- 19. It is not the law that the assessing officeroccupying the position of an investigator andadjudicator can discharge his function by perfunctoryor inadequate investigation. Such a course is bound toresult in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case,the order is erroneous and prejudicial too andtherefore revisable. Investigation should always befaithful and fruitful. Unless all fruitful areas of enquiryare pursued the enquiry cannot be said to have beenfaithfully conducted. In a different context the ApexCourt observed "contra veritatem lex numquamaliquid permittit: implies a duty on the Court to acceptand accord its approval only to a report which is theresult of faithful and fruitful investigation" (See ManuSharma Vs. State reported in 2010 (6) SCC 1 Para200 at P 80) 9.1. Therefore, he contended that the appeal deserves to be allowed and the view taken by the CIT(A) under Section 263 isrequired to be restored. 10.Counsel for the respondent has taken us to the order ofCIT(A) and contended that reply was filed by the assesseecontending as under: 2. It is stated that payment made to following parties have not been examined. In this regard we aresubmitting our explanation for each party as under: 1. Lawat Jewellers Pvt. Ltd.(1,30,54,500/-) The correct amount is Rs. 39,93,837/-. The assessee haspurchased Gold Bullion from the party. Copy of account ofthe party is enclosed. 2. Kiran Jewellers(3,99,31,437/-)The correctamount is Rs. 3,92,52,937/- The assessee has purchasedGold Bullion from the party. Copy of account of the partyis enclosed. 3. Single Bill 1010000661(1,15,00,000/-) There is no such single bill of this amount. This is theAccount No. of the proprietor Sh. Rajiv Arora with Bank ofRajasthan Ltd, Overseas Branch, Jaipur. On 16.1.2005 ChNo. 624744 Rs. 1,15,00,000/- was issued to theproprietor against his capital account. The said amount isused by the assessee for purchasing a house at K14,Malviya Marg, Jaipur. 4. Rajiv Arora (individual)(2,39,12,417/-) We could not ascertain from where the said amount isarrived. We shall explain the nature and purpose of thesaid payment if we have been informed how it is arrived. 5. Murti Corpn, Mumbai(10,06,500/-) The assessee has purchased Precious Stone (Diamond)from the party. Copy of account of the party is enclosed. 6. Amrapali Jewels Pvt. Ltd.(1,65,00,000/-)The correct amount is Rs.1,43,00,000/-. The assesseehas given loan to the said party. Copy of account of theparty is enclosed. 10.1 However, it is contended that without considering reply, the CIT (A) passed order under Section 263 remanding the matter. He has further taken us to the observation made by the Tribunalwhich reads as under:- “We have heard rival submission and considered themcarefully alongwith various case laws relied upon byLd. A.R. It is seen that various objection raised by Ld.CIT which have been incorporated in this order somewhere above, were examined by the A.O. as duringthe assessment proceeding. The A.O. issued a querryletter dated 28.05.2008. Assessee filed reply by letterdated 12.06.2008.” 10.2. He contended that after considering the judgment ofthe Bombay High Court, the Tribunal has taken a view which is required to be approved. 10.3He has relied on the following decisions:- 1. Commissioner of Income Tax vs. Deepak RealEstate Developers (I) (P) Ltd. (03.03.2014 -RAJHC) He has further taken us to the observation made by the Tribunalwhich reads as under:- “We have heard rival submission and considered themcarefully alongwith various case laws relied upon byLd. A.R. It is seen that various objection raised by Ld.CIT which have been incorporated in this order somewhere above, were examined by the A.O. as duringthe assessment proceeding. The A.O. issued a querryletter dated 28.05.2008. Assessee filed reply by letterdated 12.06.2008.” 10.2. He contended that after considering the judgment ofthe Bombay High Court, the Tribunal has taken a view which is required to be approved. 10.3He has relied on the following decisions:- 1. Commissioner of Income Tax vs. Deepak RealEstate Developers (I) (P) Ltd. (03.03.2014 -RAJHC) 3. The CIT, however, in exercise of his power under s.263 of the Act, issued notice to the respondent-assessee being of the opinion that the assessment ofthe AO was erroneous and was further prejudicial tothe interest of the Revenue. The respondent-assesseeentered appearance and submitted its detailed replyto the queries, set out in the show-cause notice. Thelearned CIT thereafter, by his order dt. 7th Jan.,2010, interfered with the assessment of the AO anddirected him (AO) to verify the details/documents, asmentioned therein and to decide the issues and passa speaking order as per law, after affording anopportunity of hearing. While arriving at thisconclusion, the learned CIT, however, held that the 3. The CIT, however, in exercise of his power under s.263 of the Act, issued notice to the respondent-assessee being of the opinion that the assessment ofthe AO was erroneous and was further prejudicial tothe interest of the Revenue. The respondent-assesseeentered appearance and submitted its detailed replyto the queries, set out in the show-cause notice. Thelearned CIT thereafter, by his order dt. 7th Jan.,2010, interfered with the assessment of the AO anddirected him (AO) to verify the details/documents, asmentioned therein and to decide the issues and passa speaking order as per law, after affording anopportunity of hearing. While arriving at thisconclusion, the learned CIT, however, held that the sale transactions pertaining to 3,39,496 ZydenGentec equity shares and effected on 20th April,2005, 28th April, 2005, 6th May, 2005, 12th May,2005 and 8th Sept., 2005, could not be construed tobe disputed as those were supported by documentaryevidence and that the AO was justified in taking aview that those shares of Overseas Capital Ltd., asappearing in sale bill, and those of Zyden GentecLtd., were the same. It was, however, of the viewthat the AO, having drawn that conclusion, ought tohave, before accepting the said transaction as long-term capital gain, examined whether the respondent-assessee was holding the same for a period of morethan one year, so as to claim exemption on thatcount. The CIT, however, acknowledged that thelearned Representative of the respondent-assesseehad brought to his notice the fact that completedetails of long-term gain on sale of shares, had beenfiled along with computation of income and wasavailable with the AO during the assessmentproceedings and that the materials at his disposal didcontain the date of purchase of the said shares. Thatthe period of holding of the shares involved was morethan one year and that those being held asinvestment and STT being paid while selling the samejustified the claim for exemption under s. 10(38) ofthe Act, was mentioned. The CIT accepted as well thesale of 3,39,496 shares on the aforementioned datesthrough its broker Inventure Growth & Securities Ltd.under the aegis of Bombay Stock Exchange for atotal consideration of Rs. 3,71,81,627.01. He held aswell that the AO was correct to conclude thatshareholding of 2,18,000 shares out therefrom, wasfor a period of more than one year, for which therespondent-assessee had been validly grantedexemption from tax under s. 10(38) of the Act. Vis-a-vis the balance shares i.e. 1,21,496 (3,39,496-2,18,000), the CIT noticed the stand of therespondent-assessee that the same were in physicalform. Referring to the supporting documentsproduced on behalf of the respondent-assessee, thelearned CIT observed that the same had not beenfiled during course of the assessment proceedingsand thus, were not verified and commented upon bythe AO. It held the view that proper verificationthereof was necessary by the AO to ensure that1,43,000 shares of Overseas Capital Ltd., which werereceived and delivered in physical form to thedirector of the respondent-assessee, were transferredto its demat account, so as to ensure that these wereheld by it (respondent-assessee) in physical form fora period of more than one year to entitle it to the benefit of exemption under s. 10(38) of the Act. Withregard to amount of loan of Rs. 43,28,000, taken bythe respondent-assessee from one Smt. Usha Gupta,the learned CIT held that the documents and recordsproduced before him in connection therewith, had notbeen laid before the AO earlier. He, thus, concludedthat in view of lack of enquiry and non-application ofmind on the part of the AO, the assessment waserroneous and prejudicial to the interest of theRevenue. Noticeably, the learned CIT did not recordany categorical finding on any aspect of theassessment made vide order dt. 25th Sept., 2008that the related conclusion of the AO was eitherfactually incorrect or unsustainable in law, havingregard to the complete materials on record. 4. Be that as it may, being aggrieved by the abovedetermination, the respondent-assessee preferred anappeal under s. 260A (sic-253) of the Act before theIncome-tax Appellate Tribunal, Jaipur Bench 'A',Jaipur (for short, hereafter referred to as 'theTribunal'), which by its rendering dt. 25th March,2011, interfered with the above-referred decision ofthe learned CIT. As the text of this order, impugned inthe present appeal, would reveal the learned Tribunaldid notice the relevant facts in extenso and observedthat-the only dispute was with regard to 1,43,000shares received in physical form and eventuallyshown in the demat account of the respondent-assessee. Referring to the documents/recordsproduced before the learned CIT, the learned Tribunalrecorded that he (CIT) had not formed any opinionthat these shares had not been held by therespondent-assessee for more than one year. Thelearned Tribunal expressed the view that in the faceof the materials before him, the learned CIT couldnot have formed any opinion that the assessmentorder was erroneous. It recalled the findings of theAO, as adverted to hereinabove and concluded thatthe learned CIT not having come to the conclusionthat the assessment order was erroneous and noreasons having been recorded to demonstrate thatthe same was prejudicial to the interest of theRevenue, he was not justified to refer the matterback to the AO and that too, without examining thematerials produced before him on merits. 7. Upon hearing the learned counsel for the partiesand on a consideration of the materials on record, weare inclined to sustain the plea taken on behalf of therespondent-assessee. The salient facts bearing on thedebate have been outlined hereinabove. To reiterate, a bare perusal of the order dt. 25th Sept., 2008 ofthe ITO (OSD), Range-1, Kota, would testify that theAO had consciously examined all relevant records inaccepting the return submitted by the respondent-assessee. Noticeably, the learned CIT, in spite of hisincisive analysis of the factual details, did not findfault with any of the findings of the AO, culminatingin ultimate conclusion that the return of therespondent-assessee was acceptable as a whole. Thetext of the decision of the learned CIT authenticatesthat the respondent-assessee had furnished to himall relevant records and documents in support of itsreturn accepted by the AO. The learned CIT didneither reject the said documents/records to beirrelevant, nor lacking in their probative worth. Itsimply remanded the matter to the AO observing thatthese ought to have been laid before him andexamined at the time of assessment. 8. It is no longer res integra that the revisionaljurisdiction available to a CIT under s. 263 of the Act,is essentially circumscribed by the determinant thatthe order of the AO is erroneous so much so that it isprejudicial to the interest of the Revenue. Thisstatutory enjoinment carves out an extremelyconstricted ambit of such discretionary jurisdiction.The word "considers" applied in the statutoryprovision involved, signifies a genuine satisfaction ofthat authority that the order of the AO is erroneousand that the interest of the Revenue is prejudicingthereby. Any exercise of the revisional jurisdiction,bereft of such satisfaction and/or finding that theorder of the AO is erroneous and that it is prejudicialto the interest of the Revenue and that too, based ontangible materials on record, is impermissiblerendering the resultant order void. Judged on theabove touchstone, we are of the unhesitant opinion,having regard to the materials on record, that nointerference with the impugned order of the learnedTribunal is warranted, in the facts and circumstancesof the case. No substantial question of law, ascontemplated by s. 260A of the Act, exists to beexamined. 2. CIT vs. Jain COnstruction CO., ITA No.60/2012 10. The settled legal position for limitation on therevisional powers of Commissioner under Section 263of the Act is that, firstly, they are limited in nature, and secondly, such revisional powers are not beinvoked merely for reviewing the order passed by theAssessing Authority on a mere change of opinion. Thesafeguard provided to the assessee in the saidprovision is that mere erroneous orders are notrevisable but the revisional authority has to furtherestablish with the material on record that sucherroneous order is also prejudicial to the interest ofrevenue. The twin conditions of assessment orderbeing erroneous and it also being prejudicial to theinterest of revenue, keeps the initial burden on theRevenue itself, namely, the Commissioner, whoinvokes such jurisdiction. From the following legalprecedents, it would be clear that such powers arenot allowed likely to be invoked for the fall of hat asit were, and merely because D.B. Income Tax AppealNo.60/2012 Commissioner of Income Tax-II, JodhpurVs. M/s Jain Construction Co. the revisional authorityis of different opinion on the given set of facts or onthe ground that Assessing Authority did not hold asufficient enquiry during the course of assessmentproceedings unless the aforesaid twin conditions forinvoking the said jurisdiction under Section 263 aresatisfied. 26. Thus having heard the learned counsel forRevenue at length and in view of aforesaid legalposition and factual matrix, we are satisfied that theTribunal was justified in holding that in these factsand upon the stated objections, the Commissionerwas in error in D.B. Income Tax Appeal No.60/2012Commissioner of Income Tax-II, Jodhpur Vs. M/s JainConstruction Co. invoking the revisional jurisdictionunder Section 263of the Act, and thus the findingsarrived at by the Tribunal essentially remain findingsof fact, which do not give rise any substantialquestion of law, requiring consideration by this Court.Mere alleged insufficiency of the enquiry in theopinion of the Commissioner by the AssessingAuthority, could not permit him to invoke therevisional jurisdiction under Section 263of the Actand, therefore, the essential twin conditions forinvoking the revisional jurisdiction, namely, theimpugned assessment being erroneous as well asprejudicial to the interest of Revenue, were not at allsatisfied in the present case and, therefore, theTribunal was perfectly justified in allowing theassessee's appeal and setting aside the order oflearned Commissioner under Section 263of the Act. 3. Income Tax Officer vs. DG Housing ProjectsLtd. (01.03.2012 - DELHC) 3. Income Tax Officer vs. DG Housing ProjectsLtd. (01.03.2012 - DELHC) 16. Thus, in cases of wrong opinion or finding onmerits, the CIT has to come to the conclusion andhimself decide that the order is erroneous, byconducting necessary enquiry, if required andnecessary, before the order under Section 263 ispassed. In such cases, the order of the AssessingOfficer will be erroneous because the order passed isnot sustainable in law and the said finding must berecorded. CIT cannot remand the matter to theAssessing Officer to decide whether the findingsrecorded are erroneous. In cases where there isinadequate enquiry but not lack of enquiry, again theCIT must give and record a finding that theorder/inquiry made is erroneous. This can happen ifan enquiry and verification is conducted by the CITand he is able to establish and show the error ormistake made by the Assessing Officer, making theorder unsustainable in Law. In some cases possiblythough rarely, the CIT can also show and establishthat the facts on record or inferences drawn fromfacts on record per se justified and mandated furtherenquiry or investigation but the Assessing Officer haderroneously not undertaken the same. However, thesaid finding must be clear, unambiguous and notdebatable. The matter cannot be remitted for a freshdecision to the Assessing Officer to conduct furtherenquiries without a finding that the order iserroneous. Finding that the order is erroneous is acondition or requirement which must be satisfied forexercise of jurisdiction under Section 263 of the Act.In such matters, to remand the matter/issue to theAssessing Officer would imply and mean the CIT hasnot examined and decided whether or not the orderis erroneous but has directed the Assessing Officer todecide the aspect/question. 4. Commissioner of Income Tax vs. SunbeamAuto Ltd. (11.09.2009 – DELHC), 332 ITR 167 12. We have considered the rival submissions of thecounsel on the other side and have gone through therecords. The first issue that arises for ourconsideration is about the exercise of power by theCommissioner of Income Tax under Section 263 ofthe Income Tax Act. As noted above, the submissionof learned Counsel for the Revenue was that whilepassing the assessment order, the AO did notconsider this aspect specifically whether theexpenditure in question was revenue or capitalexpenditure. This argument predicates on theassessment order, which apparently does not give any reasons while allowing the entire expenditure asRevenue expenditure. However, that by itself wouldnot be indicative of the fact that the AO had notapplied his mind on the issue. There are judgmentsgalore laying down the principle that the AO in theassessing order is not required to give detailedreason in respect of each and every item ofdeduction, etc. Therefore, one has to see from therecord as to whether there was application of mindbefore allowing the expenditure in question asrevenue expenditure. Learned Counsel for theassessee is right in his submission that one has tokeep in mind the distinction between "lack of inquiry"and "inadequate inquiry". If there was any inquiry,even inadequate that would not by itself giveoccasion to the Commissioner to pass orders underSection 263 of the Act, merely because he hasdifferent opinion in the matter. It is only in cases of"lack of inquiry" that such a course of action wouldbe open. In Gabriel India Ltd. (Supra), law on thisaspect was discussed in the following manner: xxx.... From a reading of Sub-section (1) of section,it is clear that the power of suo motu revision can beexercised by the Commissioner only if, onexamination of the records of any proceedings underthis Act, he considers that any order passed thereinby the Income Tax Officer is "erroneous in so far as itis prejudicial to the interests of the Revenue". It isnot an arbitrary or unchartered power. It can beexercised only on fulfilment of the requirements laiddown in Sub-section (1). The consideration of theCommissioner as to whether an order is erroneous inso far as it is prejudicial to the interests of theRevenue, must be based on materials on the recordof the proceedings called for by him. If there are nomaterials on record on the basis of which it can besaid that the Commissioner acting in a reasonablemanner could have come to such a conclusion, thevery initiation of proceedings by him will be illegaland without jurisdiction. The Commissioner cannotinitiate proceedings with a view to starting fishingand roving enquiries in matters or orders which arealready concluded. Such action will be against thewell-accepted policy of law that there must be a pointof finality in all legal proceedings, that stale issuesshould not be reactivated beyond a particular stageand that lapse of time must induce repose in and setat rest judicial and quasi-judicial controversies as itmust in other spheres of human activity. (SeeParashuram Pottery Works Co. Ltd. v. ITOMANU/SC/0250/1976MANU/SC/0250/1976 : [1977]106 ITR 1 (SC) at page 10). x x x From the aforesaid definitions it is clear that anorder cannot be termed as erroneous unless it is notin accordance with law. If an Income Tax Officeracting in accordance with law makes a certainassessment, the same cannot be branded aserroneous by the Commissioner simply because,according to him, the order should have been writtenmore elaborately This section does not visualise acase of substitution of the judgment of theCommissioner for that of the Income Tax Officer, whopassed the order unless the decision is held to beerroneous. Cases may be visualised where theIncome Tax Officer while making an assessmentexamines the accounts, makes enquiries, applies hismind to the facts and circumstances of the case anddetermines the income either by accepting theaccounts or by making some estimate himself. TheCommissioner, on perusal of the records, may be ofthe opinion that the estimate made by the officerconcerned was on the lower side and left to theCommissioner he would have estimated the incomeat a figure higher than the one determined by theIncome Tax Officer. That would not vest theCommissioner with power to re-examine the accountsand determine the income himself at a higher figure.It is because the Income Tax Officer has exercisedthe quasi-judicial power vested in him in accordancewith law and arrived at conclusion and such aconclusion cannot be termed to be erroneous simplybecause the Commissioner does not feel satisfiedwith the conclusion. x x x There must be some prima facie material onrecord to show that tax which was lawfully eligiblehas not been imposed or that by the application ofthe relevant statute on an incorrect or incompleteinterpretation a lesser tax than what was just hasbeen imposed. x x x We may now examine the facts of the present casein the light of the powers of the Commissioner setout above. The Income Tax Officer in this case hadmade enquiries in regard to the nature of theexpenditure incurred by the assessee. The assesseehad given detailed explanation in that regard by aletter in writing. All these are part of the record ofthe case. Evidently, the claim was allowed by theIncome Tax Officer on being satisfied with theexplanation of the assessee. Such decision of theIncome Tax Officer cannot be held to be "erroneous" x x x We may now examine the facts of the present casein the light of the powers of the Commissioner setout above. The Income Tax Officer in this case hadmade enquiries in regard to the nature of theexpenditure incurred by the assessee. The assesseehad given detailed explanation in that regard by aletter in writing. All these are part of the record ofthe case. Evidently, the claim was allowed by theIncome Tax Officer on being satisfied with theexplanation of the assessee. Such decision of theIncome Tax Officer cannot be held to be "erroneous" simply because in his order he did not make anelaborate discussion in that regard.... xxx 15. Thus, even the Commissioner conceded theposition that the AO made the inquiries, elicitedreplies and thereafter passed the assessment order.The grievance of the Commissioner was that the AOshould have made further inquiries rather thanaccepting the explanation. Therefore, it cannot besaid that it is a case of 'lack of inquiry'. 16. Having put the records straight on this aspect, letus proceed further. Is it a case where theCommissioner has concluded that the opinion of theAO was clearly erroneous and not warranted on thefacts before him and, viz., the expenditure incurredwas not the revenue expenditure but should havebeen treated as capital expenditure? Obviously not.Even the Commissioner in his order, passed underSection 263 of the Act, is not clear as to whether theexpenditure can be treated as capital expenditure orit is revenue in nature. No doubt, in certain cases, itmay not be possible to come to a definite finding andtherefore, it is not necessary that in all cases theCommissioner is bound to express final view, as heldby this Court in Geevee Enterprise [supra]. But, theleast that was expected was to record a finding thatorder sought to be revised was erroneous andprejudicial to the interest of the revenue. [seeSashayee Paper(supra)]. No basis for this isdisclosed. In sum and substance, accounting practiceof the assessee is questioned. However, that basis ofthe order vanishes in thin air when we find that thisvery accounting practice, followed for number ofyears, had the approval of the income tax authorities.Interestingly, even for future assessment years, thesame very accounting practice is accepted. 20. Likewise, whether the Commissioner should haverecorded definite finding or not, may not be veryrelevant factor in the present case where on the factsof this case we have found that the opinion of the AOin treating the expenditure as revenue expenditurewas plausible and thus there was no material beforethe CIT to vary that opinion and ask for fresh inquiry. 5. Commissioner of Income Tax vs. VikasPolymers(16.08.2010-DELHC):MANU/DE/2159/2010 9. Before we undertake the exercise of answering thereference, it is deemed expedient to reiterate thegoverning principles laid down by Courts with regardto the exercise of power by the Commissioner under the provisions of Section 263 of the Act. The power ofsuo moto revision exercisable by the Commissioner isundoubtedly supervisory in nature. The openingwords of Section 263 empowers the Commissioner tocall for and examine the record of any proceedingsunder the Act. A bare reading of Section 263 alsomakes it clear that the Commissioner has to besatisfied of twin conditions, namely, (i) the order ofthe assessing officer sought to be revised iserroneous; and (ii) it is prejudicial to the interest ofthe revenue. If one of them is absent - if the order ofthe Income Tax Officer is erroneous but is notprejudicial to the revenue or if it is not erroneous butit is prejudicial to the revenue - recourse cannot behad to Section 263(1) of the Act See MalabarIndustrialCo.Ltd.v.CITMANU/SC/3008/2000MANU/SC/3008/2000 : (2000)243 ITR 83 (SC). 13. It is also trite that there is a fine though subtledistinction between "lack of inquiry" and "inadequateinquiry". It is only in cases of "lack of inquiry" thatthe Commissioner is empowered to exercise hisrevisional powers by calling for and examining therecords of any proceedings under the Act and passingorders thereon. In Gabriel India Ltd. (supra), it wasexpressly observed: The Commissioner cannot initiate proceedings witha view to starting fishing and roving enquiries inmatters or orders which are already concluded. Suchaction will be against the well-accepted policy of lawthat there must be a point of finality in all legalproceedings, that stale issues should not bereactivated beyond a particular stage and that lapseof time must induce repose in and set at rest judicialand quasi-judicial controversies as it must in otherspheres of human activity see Parashuram PotteryWorksCo.Ltd.v.ITOMANU/SC/0250/1976MANU/SC/0250/1976 : (1977)106 ITR 1 (SC). It was further observed as under: From the aforesaid definitions as it is clear that anorder cannot be termed as erroneous unless it is notin accordance with law. If an Income Tax Officeracting in accordance with law makes a certainassessment, the same cannot be branded aserroneous by the Commissioner simply because,according to him, the order should have been writtenmore elaborately. This section does not visualize acase of substitution of the judgment of theCommissioner for that of the Income Tax Officer, whopassed the order unless the decision is held to be erroneous. Cases may be visualized where theIncome Tax Officer while making an assessmentexamines the accounts, makes enquiries, applies hismind to the facts and circumstances of the case anddetermines the income either by accepting theaccounts or by making some estimate himself. TheCommissioner, on perusal of the records, may be ofthe opinion that the estimate made by the officerconcerned was on the lower side and left to thecommissioner he would have estimated the income ata figure higher than the one determined by theIncome Tax Officer. That would not vest theCommissioner with power to re-examine the accountsand determine the income himself at a higher figure.It is because the Income Tax Officer has exercisedthe quasi-judicial power vested in him in accordancewith law and arrived at conclusion and such aconclusion cannot be termed to be erroneous simplybecause the Commissioner does not feel satisfiedwith the conclusion. x x x x There must be some prima facie material onrecord to show that tax which was lawfully exigiblehas not been imposed or that by the application ofthe relevant statute on an incorrect or incompleteinterpretation a lesser tax than what was just hasbeen imposed. x x x x We may now examine the facts of the present casein the light of the powers of the Commissioner setout above. The Income Tax Officer in this case hadmade enquiries in regard to the nature of theexpenditure incurred by the assessee. The assesseehad given detailed explanation in that regard by aletter in writing. All these are part of the record ofthe case. Evidently, the claim was allowed by theIncome Tax Officer on being satisfied with theexplanation of the assessee. Such decision of theIncome Tax Officer cannot be held to be "erroneous"simply because in his order he did not make anelaborate discussion in that regard.... 15. Applying the aforesaid law to the facts of thepresent case, we are of the view that the exercise ofrevisional power by the Commissioner in the instantcase was uncalled for and unjustified. It was more inthe nature of roving and fishing enquiry. TheCommissioner has proceeded on the assumption thatno such information, as was furnished to him, wasfurnished at the time of assessment. TheCommissioner has mentioned that the Income Taxofficer has not examined the cash credits of the 15. Applying the aforesaid law to the facts of thepresent case, we are of the view that the exercise ofrevisional power by the Commissioner in the instantcase was uncalled for and unjustified. It was more inthe nature of roving and fishing enquiry. TheCommissioner has proceeded on the assumption thatno such information, as was furnished to him, wasfurnished at the time of assessment. TheCommissioner has mentioned that the Income Taxofficer has not examined the cash credits of the partners or deposits of Chit Fund. Assuming this tobe so (though there does not appear to be anyjustification for the aforesaid observation), this maymake the order erroneous, but how it is prejudicial tothe interest of the revenue has not been stated bythe Commissioner as he did not deal with theexplanation given by the assessee in the course ofSection 263 proceedings. 6. Nirmala Devi Chordia vs. The CIT (29.05.2015 - ITAT Jaipur) 2.11 We have heard the rival contentions andperused the materials available on record. We findfrom the record that the assessee had already filedthe return of income despite that she has beenwrongly accused of not filing the same; thissubjected the assessee to rigor of avoidable 148proceedings. The record and submissions filed duringthe course of assessment proceedings did not in anymanner indicate that proper enquiries and verificationwere not conducted. The order of the AO thoughshort yet crisp and clear in arriving at proper findingsreflecting reasonable discharge of assessment whichcannot be held as erroneous. In our considered view,the case laws cited by the ld. AR in the case of CIT v.Sun Beam Auto Ltd. (Delhi), Malabar Industrial Co.Ltd. v. CIT (SC) and CIT v. Max India Ltd. (supra)support assessee's contentions. We are of view that263 proceedings cannot be invoked where reasonableinquiries are conducted with application of mind;there is conspicuous difference between the cases oflack of enquiry and perception about the level ofenquiry. In this case it emerges that ld. CIT carried adifferent perception about the manner of enquirywhich ought to have been conducted by the AO;however it is not 'sufficient to hold the assessmentorder as erroneous and thereby prejudicial to theinterest of revenue. The plethora of case laws citedby the assessee do not support such type of exerciseof power u/s. 263