1

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR

BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER.

ITA No. 06/Jodh/2012 (A. Y. 2007-08)

Shri Gagan Deep Kathuria Vs. ACIT P/o M/s Shivam Property Dealer Sriganganagar Khinchi Chowk Sriganganagar PAN No. : AMJPK 6483 G (Appellant) (Respondent) Assessee by : Shri Suresh Ojha Department by : Shri Deepak Sehgal - DR Date of hearing : 14/03/2013. Date of pronouncement : 30/04/2013.

PER HARI OM MARATHA, J.M:-

This appeal of the assessee for A.Y. 2007-08 is directed against

the order of the ld. CIT, Bikaner dated 3.10.2011.

2. Briefly stated, the facts of the case are that assessment was

completed u/s 143(3) of the Income-tax Act, 1961 [hereinafter

referred to as 'the Act', for short] on 30.12.2009 at total income of Rs.

74,75,000/-. Survey proceedings u/s 133A of the Act had been

conducted at the business premises of the assessee on 8.12.2006.

2

During survey proceedings, the assessee had made a surrender of Rs.

74 lakhs for A.Y. 2007-08. The assessee is pursuing the business of a

property dealer. The ld. CIT, after calling for records of this A.Y.,

found that it is not only erroneous but also prejudicial to the interest

of the Revenue. Accordingly, he has set aside the assessment order for

making it afresh. Now the assessee has filed this appeal by raising the

following grounds:

1. That the order passed u/s 263 of the Income-tax Act, 1961

by the ld. CIT is bad in law, illegal and against facts.

2. That the ld. CIT erred in passing the order u/s 263 of

the Act even when the matters were properly dealt by the

ACIT at the time of assessment proceedings.

3. That the ld. CIT erred in holding that the assessee has

made total investment of Rs. 132.03 lakhs in various

properties out of his undisclosed income and surrendered

Rs. 72 lakhs only and directing the A.O. to make addition

of Rs. 60.03 lakhs to the total income of the assessee.

4. That the ld. CIT erred in setting aside the case on issue of

verification of new cash creditors introduced during the

year amounting to Rs. 13,50,000/-.

3

5. The ld. CIT erred in setting aside the case on account of

allowing telescopic by the A.O. of Rs. 2 lakhs surrendered

during the course of survey.”

3. We have heard the rival submissions and have carefully perused

the entire material on record. It was submitted by the ld. A.R. that

the A.O. has made all the necessary enquiries from the assessee and

has legally passed his order and there is no error in this order as has

been alleged by the ld. CIT. On the other hand, the ld. CIT, DR has

supported the finding of the ld. CIT and has reiterated all the reasons

taken by him to set aside the assessment order for redoing the same.

4. Assessment was completed in this case u/s 143(3) of the Act on

30.12.2009 at a total income of Rs. 74,75,000/- as we have mentioned

earlier. The A.O. has issued notice u/s 142(1) of the Act dated

16.12.2009, a copy of which is enclosed at pages 1 to 4 of the

assessee’s paper book. The assessee submitted its reply regarding Rs.

60,03,000/- and also in respect of other queries raised by the A.O. vide

letter dated 16.12.2009 which are enclosed at pages 6,7 and 9 of

assessee’s paper book. The ld. CIT issued show-cause notice, copy of

which is enclosed at pages 15 & 16 of assessee’s paper book. Relevant

portion of this show cause notice reads as under:

4

“1. The A.O. has completed the assessment in a routine

manner without making proper enquiry and investigation

regarding the investment and its source amounting to Rs.

60,03,000/- made by the assessee in the various properties

during the year under consideration. The amount of surrender

of Rs. 72.00 lakhs were made during the course of survey on

account of advance paid for purchase of land situated at 4 ML,

Sriganganagar, which is different that the amount of Rs. 60.03

lakhs invested in other properties. According to the ld. CIT, the

A.O. should have made a separate addition of Rs. 60.03 lakhs.

2. The A.O. has not properly examined and verified the new

creditors/loan of Rs. 13,50,000/- introduced during the year.

3. Details regarding business receipts from property

brokerage of the assessee has not been verified by the A.O. and

the A.O. has not made any enquiry in respect of investment in

residential property situated at 154 G Block Sriganganagar.

5. We have heard both sides in detail. We have also perused

carefully the entire evidences available on record. It is trite that an order

can be revised only and only if twin conditions of ‘error in the order’ and

5

‘prejudice caused to the Revenue’ co-exist. The subject of ‘revision under

section 263’ has been vastly examined and analyzed by various Courts

including that of Hon’ble Apex Court. The revisional power conferred on the

CIT vide section 263 is of vide amplitude. It enables the CIT to call for and

examine the records of any proceeding under the Act. It empowers the CIT

to make or cause to be made such an enquiry as he deems necessary in order

to find out if any order passed by Assessing Officer is erroneous in so far as it

is prejudicial to the interests of the Revenue. The only limitation on his

powers is that he must have some material(s) which would enable him to

form a prima facie opinion that the order passed by the Assessing Officer is

erroneous in so far as it is prejudicial to the interest of the Revenue. Once

he comes to the above conclusion on the basis of the ‘material’ that the

order of the Assessing Officer is erroneous and also prejudicial to the

interests of the Revenue, the CIT is empowered to pass an order as the

circumstances of the case may warrant. He may pass an order enhancing

the assessment or he may modify the assessment. He is also empowered to

cancel the assessment and direct to frame a fresh assessment. He is

empowered to take recourse to any of the three courses indicated in section

263. So, it is clear that the CIT does not have unfettered and unchequred

discretion to revise an order. The CIT is required to exercise revisional

power within the bounds of the law and has to satisfy the need of fairness in

administrative action and fair play with due respect to the principle of audi

alteram partem as envisaged in the Constitution of India as well as in

6

section 263. An order can be treated as ‘erroneous’ if it was passed in utter

ignorance or in violation of any law; or passed without taking into

consideration all the relevant facts or by taking into consideration irrelevant

facts. The ‘prejudice’ that is contemplated under section 263 is the

prejudice to the Income Tax administration as a whole. The revision has to

be done for the purpose of setting right distortions and prejudices caused to

the Revenue in the above context. The fundamental principles which

emerge from the several cases regarding the powers of the CIT under section

263 may be summarized below:

(i) The CIT must record satisfaction that the order of the

Assessing Officer is erroneous and prejudicial to the interests

of the revenue. Both the conditions must be fulfilled.

(ii) Section 263 cannot be invoked to correct each and every type

of mistake or error committed by the Assessing Officer and it

is only when an order is erroneous, that the section will be

attracted.

(iii) An incorrect assumption of facts or an incorrect application

of law will suffice for the requirement or order being

erroneous.

(iv) If the order is passed without application of mind, such order

will fall under the category of erroneous order.

(v) Every loss of revenue cannot be treated as prejudicial to the

interest of the revenue and if the Assessing Officer has

7

adopted one of the courses permissible under law or where

two views are possible and the Assessing Officer has taken

one view under with which the CIT does not agree, it cannot

be treated as an erroneous order, unless the view taken by

the Assessing Officer is unsustainable under the law.

(vi) If while making the assessment, the Assessing Officer examines

the accounts, makes enquiries, applies his mind to the facts

and circumstances of the case and determines the income,

the CIT, while exercising his power under section 263, is not

permitted to substitute his estimate of income in place of the

income estimated by the Assessing Officer.

(vii) The Assessing Officer exercise quasi-judicial power vested in

him and if he exercise such power in accordance with law and

arrives as a conclusion, such conclusion cannot be termed to

be erroneous simply because the CIT does not feel satisfied

with the conclusion.

(viii) The CIT, before exercising his jurisdiction under section 263,

must have material on record to arrive at a satisfaction.

(ix) If the Assessing Officer has made enquiries during the course

of assessment proceedings on the relevant issues and the

assessee has given detailed explanation be a letter in writing

and the Assessing Officer allowed the claim on being satisfied

with the explanation of the assessee, the decision of the

Assessing Officer cannot be held to be erroneous simply

because in his order he does not make an elaborate discussion

in that regard.

8

6. Reverting to the facts of this case, we have found from the perusal of

the assessment order that the A.O. has examined in respect of the amount

of Rs. 60.03 lakhs and has specifically raised a query as to why this amount

should not be added in assessee’s income. After considering the assessee’s

reply and the affidavit and after applying his mind, the A.O. has reached to

the conclusion that in the totality of the facts and circumstances of the

case, I find the reply as plausible. He has stated that he applied his mind

and in his opinion there was no point in making this addition separately as it

stood covered in the surrendered income of Rs. 74 lakhs made by the

assessee at the time of survey. Thus, it cannot be said that the A.O. has not

applied his mind to this issue. In view of the legal position on this subject of

revision to be made u/s 263 of the Act as discussed above, the ld. CIT

cannot replace his opinion when the A.O. has taken one of the possible

views after applying his mind to a specific item of income. The assessee had

relied on various decisions in this regard which have also been considered by

the A.O. The Hon'ble Jurisdictional High Court has taken similar view that

when the A.O. takes a decision after going through the material available on

record and after considering the explanation of the assessee, it cannot be

said that he has not applied his mind. In this regard, the following

decisions of the Hon'ble Rajasthan High Court are relevant:

1. CIT Vs. Girdhari Lal 258 ITR 331 [Raj]

2. CIT Vs. Ganpat Ram Vishnoi 296 ITR 292 [Raj]

3. CIT Vs. Shiv Hari Madhusudan 233 ITR 649 [Raj]

9

It is settled position of law that when the A.O. adopts one of the permissible

course of law, the ld. CIT does not agree with it, the order cannot be

treated as erroneous in so far as it is prejudicial to the interest of the

Revenue unless the view taken by the A.O. is unsustainable in law. It is well

settled proposition of law as laid down by the Hon'ble Punjab and Haryana

High Court in CIT Vs. Sohara Wollen Mills reported in 296 ITR 278 in which it

has been laid down that mere audit objection and because different view

could be taken are not enough to say that the order of the A.O. is erroneous

in so far as it is prejudicial to the interest of the Revenue. Thus we do not

find this ground to be erroneous as has been claimed by the ld. CIT.

7. Regarding cash creditors, again this matter was properly examined by

the A.O. The assessee filed its reply stating all facts in his letter dated

18.8.2011. The A.O. applied his mind and took a decision. The assessee

also filed affidavit, which was considered by the A.O. The contents of the

affidavit are deemed to be accepted in the absence of cross-examination. In

this regard, decision of this Bench in the case reported in 36 TW 1 is

relevant.

8. Regarding investment in house at 154 G-Block, Sriganganagar, the A.O.

made enquiries. The assessee surrendered Rs. 2 lakhs of brokerage receipt,

which is mentioned in first para at page 9 of the assessment order. Thus, in

view of the aforementioned legal position and the facts of this case, we are

10

of the considered opinion that the assessment order is neither erroneous and

when the twin conditions do not co exist, the order cannot be revised.

Accordingly, we set aside the impugned order of the ld. CIT(A) and allow the

appeal of the assessee.

9. In the result, the appeal of the assessee is allowed

Order pronounced in the open court on 30th April 2013.

Sd/- Sd/-

[N.K. Saini] [Hari Om Maratha] Accountant Member Judicial Member Dated : 30th April, 2013. VL Copy to :

1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR

ASSISTANT REGISTRAR