M/s Gupta Spinning Mills Pvt. Ltd., Delhi v. DCIT, New Delhi

ITA 3398/DEL/2010 | 2006-2007
Pronouncement Date: 29-02-2012 | Result: Allowed

Appeal Details

RSA Number 339820114 RSA 2010
Assessee PAN AAACG0650A
Bench Delhi
Appeal Number ITA 3398/DEL/2010
Duration Of Justice 1 year(s) 7 month(s) 17 day(s)
Appellant M/s Gupta Spinning Mills Pvt. Ltd., Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 29-02-2012
Date Of Final Hearing 14-02-2012
Next Hearing Date 14-02-2012
Assessment Year 2006-2007
Appeal Filed On 12-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI JM & SHRI A.N. PAHUJA AM ITA NO.3398/DEL/2010 ASSESSMENT YEAR:2006-07 M/S GUPTA SPINNING MILLS PVT. LTD. FLAT NO.532 NEELKANTH APARTMENTS SECTOR-13 ROHINI DELHI V /S . CIT DELHI-IV ROOM NO. 397 C.R. BUILDING IP ESTATE NEW DELHI [PAN : AAACG 0650A] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI AJAY VOHRA &ROHIT GARG ARS. REVENUE BY SHRI RIS GILL DR DATE OF HEARING 14-02-2012 DATE OF PRONOUNCEMENT 29-02-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 12 TH JULY 2010 BY THE REVENUE AGAINST AN ORDER DATED 3RD MAY 2010 OF THE LD. CIT DELHI-IV RAISES THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (CIT) U/S 263 OF THE INCOME-TAX ACT 19 61 (THE ACT) SETTING ASIDE THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT AS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE IS WITHOUT JURISDICTION BA D IN LAW AND VOID AB-INITIO. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT ERRED IN HOLDING THAT THE ASSESSMEN T ORDER IS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE ON THE ISSUE OF TAXABILITY OF INCOME FROM TRANSFER OF SHARES UNDER THE HEAD CAPITAL GAINS O R UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS & PROFESSION ITA N O.3398 /DEL./2010 2 2.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT ERRED IN EXERCISING JURISDICTION U/ S 263 BY SETTING ASIDE THE AFORESAID ISSUE EVEN THOUGH THE S AME HAD BEEN DISCUSSED AND SCRUTINIZED BY THE ASSESSING OFFICER IN DETAIL WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT. 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT ERRED IN SETTING ASIDE THE AFORESAI D ISSUE EVEN AFTER RECORDING PRIMA FACIE FINDING ON THE MER ITS OF THE ISSUE IN FAVOUR OF THE APPELLANT. 2.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT FAILED TO POINT OUT ANY ERROR IN TH E ORDER OF THE ASSESSING OFFICER IN ASSESSING PROFIT ON TRANSF ER OF SHARES AS CAPITAL GAINS WHICH IS SINE QUE NON FO R INITIATION OF PROCEEDINGS U/S 263 OF THE ACT. 3. WITHOUT PREJUDICE THAT THE CIT ERRED ON FACTS A ND IN LAW IN SETTING ASIDE THE ASSESSMENT ORDER TO BE RED ONE AFRESH AND NOT MERELY SETTING ASIDE THE AFORESAID I SSUE OF TAXABILITY OF INCOME FROM SALE OF SHARES. 4. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEN D OR VARY ANY OF THE ABOVE GROUNDS OF APPEAL BEFORE OR A T THE TIME OF HEARING. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE TH AT RETURN DECLARING INCOME OF ` ` 2 14 62 660/- FILED ON 23.10.2006 BY THE ASSESSEE TRADING IN SHARES WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOT ICE U/S 143(2) OF THE INCOME- TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) ISSUED ON 26.10.2007. SUBSEQUENTLY ASSESSMENT WAS COMPLETED U/S 143(3) O F THE ACT VIDE ORDER DATED 27.10.2008 ON AN INCOME OF ` 2 14 89 772/- WITH THE DISALLOWANCE OF ` 27 110/- U/S 14A OF THE ACT. LATER THE LD. CIT-DELHI-IV ON EXAMINATION OF RECORDS FOUND THAT THE SHARES HELD BY THE ASSESSEE FORMED PART OF STOCK IN TRADE INSTEAD OF CAPITAL INVESTMENT AND THEREFORE WAS OF THE OPINIO N THAT THE PROFIT ON SALE OF SHARES SHOULD HAVE BEEN TREATED AS BUSINESS PROFIT INSTEAD OF CAPITAL GAINS. SINCE NO ENQUIRY WAS MADE BY THE ASSESSING OFFICER (A.O. IN SHORT) ON THE ISSUE AS TO WHETHER THE PROFIT FROM SALE OF SHARES COULD BE TREATED AS BUSINESS ITA N O.3398 /DEL./2010 3 PROFIT OR SHORT/LONG TERM CAPITAL GAIN AFTER ALLOW ING AN OPPORTUNITY TO THE ASSESSEE THE LD. CIT CONCLUDED AS UNDER:- I HAVE HEARD THE AUTHORIZED REPRESENTATIVE GONE T HROUGH THE SUBMISSION AS ALSO THE FACTS OF RECORDS. PRIMA FAC IE THE ASSESSEES SUBMISSION HAS SOME STRENGTH AND NEEDS APPROPRIATE CONSIDERATION AS PER LAW. AT THE SAME TIME IT IS A LSO A MATTER OF RECORD THAT THERE IS A LACK OF ENQUIRY/INVESTIGATIO N ON THE PART OF THE ASSESSING OFFICER. TO THAT EXTENT IT CAN CERTAINLY BE HELD THAT THE ORDER OF THE ASSESSING OFFICER IS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE THE PROVISION OF SECTION 263 OF THE ACT IS INVOKED AND THE ORDER OF ASSESSING OFFICER IS SET ASIDE TO BE REDONE AFRESH. THE ASSESSEE SHA LL BE GIVEN REASONABLE OPPORTUNITIES OF BEING HEARD. 3. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT. AT THE OUTSET THE LD. LEA RNED AR ON BEHALF OF THE ASSESSEE WHILE INVITING OUR ATTENTION TO PAGE 12 OF THE PAPE R BOOK CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO RAISED A SPECIFIC QUERY ON THE ISSUE OF TRADING IN SHARES AND THE ASSESSEE HAD FIL ED A DETAILED REPLY VIDE LETTER DATED 16 TH OCTOBER 2008 . SINCE THE AO HAD APPLIED HIS MIND TO THE FACTS OF THE CASE AND HAD RAISED A SPECIFIC QUERY THE LD. CIT W AS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. THE FINDINGS OF THE LD. CIT THAT THERE WAS LACK OF INQUIRY IS FACTUALLY INCORRECT THE LD. A R SUBMITTED. INTER ALIA THE LD. AR RELIED UPON THE DECISIONS IN CIT VS. MAX INDIA LTD . 295 ITR 282 (S.C.);CIT VS. SUNBEAM AUTO LTD. 332 ITR 167 (DEL.);CIT VS. ANIL K UMAR SHARMA 335 ITR 83 (DEL);CIT VS. VIKAS POLYMERS 236 CTR 476/194 TAXMA N 57;HARI IRON TRADING CO. VS. CIT 263 ITR 437 (P&H);MALABAR INDUSTRIAL C O. LTD. VS. CIT 243 ITR 83 (S.C.);CIT VS. HINDUSTAN COCA COLA BEVERAGES (P) LT D. 331 ITR 192(DEL.);CIT VS. INTERNATIONAL TRAVEL HOUSE LTD. 194 TAXMAN 324 ;CIT VS. DLF POWER LTD. 329 ITR 289(DEL.);CIT VS. EICHER LTD. 294 ITR 310 (DEL.);CIT VS. ASHISH RAJPAL 320 ITR 674 (DEL.);CIT VS. ROHIT ANAND 327 ITR 445 (DEL);CIT VS. GOPAL PUROHIT 228 CTR 582(BOM.); AND CIT VS. PNB FINANCE & INDUSTRIES LTD 236 CTR 1 (DELHI). ITA N O.3398 /DEL./2010 4 4. ON THE OTHER HAND THE LD. DR SUPPORTED THE FIN DINGS OF THE LD. CIT AND FURTHER CONTENDED THAT ISSUE HAD NOT BEEN EXAMI NED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN HIS REJOINDER THE LD.AR SUBMITTED THAT THE ASSESSEE DEALT WITH ONLY ONE SCRIP AND PROFIT FROM SALE OF SHARES WAS REFLECTED AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN DEPENDING UPON THEIR HOLDING. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THO UGH THE FACTS OF THE CASE AS ALSO THE AFORECITED DECISIONS. SINCE THE ISSUE RELA TES TO ASSUMPTION OF JURISDICTION BY THE CIT U/S 263 OF THE ACT WE MAY AT THE OUT SET HAVE A LOOK AT THE RELEVANT PROVISIONS WHICH READ AS UNDER:- 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE HE MAY AFTER GIVIN G THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY PASS SUCH ORDER THER EON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION.- FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT FOR THE PURPOSES OF THIS SUB-SECTION - (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE 1988 BY THE ASSESSING OFFICER SHALL INCLUDE - (I) AN ORDER OF A SSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR TH E INCOME-TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY TH E JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON OR ASSIGNED TO HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMM ISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT A VAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; ITA N O.3398 /DEL./2010 5 (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE 1988 THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AND SHALL BE DE EMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB- SECTION (1) A FTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH T HE ORDER SOUGHT TO BE REVISED WAS PASSED. .. 5.1. THE LD. AR ON BEHALF OF THE ASSESSEE POINT ED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD ENQUIRED IN T O THE ISSUE OF TAXATION OF INCOME FROM SALE OF SHARES AND AFTER CONSIDERING TH EIR DETAILED REPLY DATED 16.10.2008 ACCEPTED THE SUBMISSIONS OF THE ASSESSEE . THE SAID REPLY OF THE ASSESSEE READS AS UNDER:- THE ASSESSEE COMPANY HAD NOT MADE ANY FRESH INVEST MENT(S) DURING THE YEAR UNDER PURVIEW. THE INVESTMENT PERT AINS TO PAST YEARS. MOREOVER THE ASSESSEE DID NOT EARN ANY BRO KERAGE AMONG THE TRANSACTION WHICH COULD PROVE THAT THE TRANSAC TIONS WERE MADE TO EARN BROKERAGE. APART THE ASSESSEE COMPANY HAD SHOWN SUCH INVESTME NTS SINCE MANY YEARS AND ACCORDINGLY INCOME EARNED THEREIN WE RE COMPUTED UNDER THE HEAD CAPITAL GAIN. ALSO YOUR HONOUR CAN VIEW THAT NO FREQUENT TRANSACTIONS WERE EXISTING WHICH PROVES TH E NATURE OF RECEIPT IS REVENUE NATURE. MOREOVER IN BOOKS OF ACCOUNT ALSO SHARES ARE CLASS IFIED AS INVESTMENT NOT AS STOCK IN TRADE. THE MANAGEMENT O F THE COMPANY HAD NOT EVEN CONVERTED SUCH INVESTMENT INTO STOCK I N TRADE AT ANY TIME DURING THE YEAR. BESIDES ABOVE CIRCULAR NO.4/2007 DT. 15.06.2007 PRE SCRIBES THE DISTINCTION BETWEEN SHARES HELD AS STOCK IN TRADE A ND SHARES HELD AS INVESTMENTS 1. THE INCOME-TAX ACT 1961 MAKES A DISTINCTION BET WEEN A CAPITAL ASSET AND A TRADING ASSET. ITA N O.3398 /DEL./2010 6 2. CAPITAL ASSET IS DEFINED IN SECTION 2(14) OF THE ACT. LONG- TERM CAPITAL ASSETS AND GAINS ARE DEALT WITH U/S 2( 29A) AND SECTION 2(29B). SHORT-TERM CAPITAL ASSETS AND GAIN S ARE DEALT WITH U/S 2(42A) AND SECTION 2(42B). 3. TRADING ASSET IS DEALT WITH U/S 28 OF THE ACT. 4. THE CENTRAL BOARD OF DIRECT TAXES (CBDT) THROUGH INSTRUCTION NO.1827 DATED AUGUST 31 1989 HAD BROU GHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THERE IS A DISTINCTION BETWEEN SHARES HELD AS INVESTMENT (CAPITAL ASSET) A ND SHARES HELD AS STOCK-IN-TRADE (TRADING ASSET). IN THE LIGHT OF A NUMBER OF JUDICIAL DECISIONS PRONOUNCED AFTER THE I SSUE OF THE ABOVE INSTRUCTIONS IT IS PROPOSED TO UPDATE TH E ABOVE INSTRUCTIONS FOR THE INFORMATION OF ASSESSEE AS WEL L AS FOR GUIDANCE OF THE ASSESSING OFFICER. 5. IN THE CASE OF COMMISSIONER OF INCOME-TAX (CENTR AL) CALCUTTA VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P) LTD. (1971) 82 ITR 586 THE SUPREME COURT OBSERVED THAT: WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY O F INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD IN NORMAL CIRCUMSTANCES BE IN A POSITION TO PRODUCE E VIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DIS TINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK-IN-TRADE A ND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 6. IN THE CASE OF COMMISSIONER OF INCOME-TAX BOMBA Y VS. H. HOLCK LARSEN (1986) 160 ITR 67 THE SUPREME COURT OBSERVED: THE HIGH COURT IN OUR OPINION MADE A MISTAKE IN OBSERVING WHETHER TRANSACTIONS OF SALE AND PURCHASE OF SHARES WERE TRADING TRANSACTIONS OR WHETHER THESE WERE IN THE NATURE OF INVESTMENT WAS A QUESTION OF LAW. THIS WAS A MIXED QUESTION O F LAW AND FACT. 7. THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE ABOVE TWO CASES AFFORD ADEQUATE GUIDANCE TO THE ASSESSING OFFICERS. 8. THE AUTHORITY FOR ADVANCE RULINGS (AAR) (288 ITR 641) REFERRING TO THE DECISIONS OF THE SUPREME COURT IN SEVERAL CASES HAS CULLED OUT THE FOLLOWING PRINCIPLES: (I) WHERE A COMPANY PURCHASES AND SELLS SHARES IT MUST BE SHOWN THAT THEY WERE HELD AS STOCK-IN-TRADE. ITA N O.3398 /DEL./2010 7 (II)THE SUBSTANTIAL NATURE OF TRANSACTIONS THE MAN NER OF MAINTAINING BOOKS OF ACCOUNT THE MAGNITUDE OF PURC HASES AND SALES AND THE RATIO BETWEEN PURCHASES AND SALES AND THE HOLDING WOULD FURNISH A GOOD GUIDE TO DETERMINE /THE NATURE OF TRANSACTIONS; (III)ORDINARILY THE PURCHASE AND SALE OF SHARES WIT H THE MOTIVE OF EARNING A PROFIT WOULD RESULT IN THE TRANSACTIO N BEING IN THE NATURE OF TRADE/ADVENTURE IN THE NATURE OF TRAD E; BUT WHERE THE OBJECT OF THE INVESTMENT IN SHARES OF A C OMPANY IS TO DERIVE INCOME BY WAY OF DIVIDEND ETC. THEN THE PROFITS ACCRUING BY CHANGE IN SUCH INVESTMENT (BY SALE OF S HARES) WILL YIELD CAPITAL GAIN AND NOT REVENUE RECEIPT. 9. CBDT ALSO WISHES TO EMPHASISE THAT IT IS POSSIBL E FOR A TAXPAYER TO HAVE TWO PORTFOLIOS I.E. AN INVESTMEN T PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISING OF STOCK- IN-TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. WHERE A N ASSESSEE HAS TWO PORTFOLIOS THE ASSESSEE MAY HAVE INCOME UNDER BOTH HEADS I.E. CAPITAL GAINS AS WELL AS BU SINESS INCOME. IN THE INSTANT CASE ALSO THE ASSESSEE COMPANY HAD A CCOUNTED THE SHARES AS INVESTMENTS NOT AS STOCK IN TRADE. SECONDLY THE ASSESSEE HAD EARNED THE DIVIDEND UPON THE INVESTMENTS HELD. WHICH ITSELF P ROVES THAT THE AIM OF THE ASSESSEE IS TO EARN THE INCOME UPON LONG TERM INVES TMENTS. HENCE THE SAME HENCE THE SAME MAY PLEASE BE TREATED AS CAPITAL RE CEIPT NOT AS REVENUE RECEIPTS. 5.2 AS IS APPARENT FROM THE AFORESAID PROVISI ONS OF SEC. 263 OF THE ACT THE POWER OF SUO MOTO REVISION EXERCISABLE BY THE CIT IS UNDOUBTEDLY SUPERVISORY I N NATURE. THE OPENING WORDS OF SECTION 263 EMPOWER TH E CIT TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT . A BARE READING OF SECTION 263 ALSO MAKES IT CLEAR THAT THE COMMISSIONER HAS T O 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 INTERE ST OF THE REVENUE. IF ONE OF THEM IS ABSENT I.E. IF THE ORDER OF THE AO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO PROVISIONS OF THE 263(1) OF THE ACT AS HELD IN MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC). ITA N O.3398 /DEL./2010 8 5.3. AS REGARDS THE SCOPE AND AMBIT OF TH E EXPRESSION ERRONEOUS HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108 (BOMBAY) WHILE REFERRING TO BLACKS LAW DICTIONARY THAT AN ERRONEOUS JUDGMENT MEANS ONE RENDERED ACCORDING TO COURSE A ND PRACTICE OF COURT BUT CONTRARY TO LAW UPON MISTAKEN VIEW OF LAW; OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES OBSERVED THAT AN ORDER CANNOT B E TERMS AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN AO ACTING I N ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE CIT MERELY BECAUSE ACCORDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN DIFFERENTLY OR MORE ELABORATELY. THE PROVISIONS OF SEC. 263 OF THE ACT DO NOT VISUALIZE THE SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FO R THAT OF THE AO UNLESS HIS ORDER IS NOT IN ACCORDANCE WITH LAW. THERE AGAIN E VERY ERRONEOUS ORDER CANNOT BE THE SUBJECT MATTER OF REVISION BECAUSE THE SECON D REQUIREMENT HAS ALSO TO BE FULFILLED. THERE MUST BE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED AS HELD IN GABRIEL I NDIA LTD. (SUPRA). HOWEVER THE EXPRESSION PREJUDICIAL TO THE INTEREST OF THE REVENUE AS HELD BY THE HONBLE SUPREME COURT IN THE MALABAR INDUSTRIAL CO. LTD. 24 3 ITR 83(SC) IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT AND THEREFORE MUST BE UNDERSTOOD IN ITS ORDINARY MEANING. IT IS OF WIDE IMPORT AND I S NOT CONFINED TO ONLY THE LOSS OF REVENUE. THE WORDS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS OBSERVED IN DAWJEE DADABHOY AND CO. VS. S.P. JAIN 31 ITR 872 ( CALCUTTA ) CAN ONLY MEAN THAT THE ORDERS OF ASSESSMENT CHALLENGED ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZED. THUS THE EX ERCISE OF REVISIONAL JURISDICTION UNDER THE PROVISIONS OF SECTION 263 OF THE ACT IS LIMITED TO CASES WHERE THE COMMISSIONER ON EXAMINING THE RECORDS COMES TO THE CONCLUSION THAT THE EARLIER FINDING OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THAT FRESH DETERMINATION OF THE ASSESSMENT WAS NE CESSARY. THERE MUST BE MATERIAL TO JUSTIFY THE COMMISSIONERS FINDING THAT THE ORDER OF THE ASSESSMENT WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA N O.3398 /DEL./2010 9 5.4. THOUGH THERE IS A FINE THOUGH SUBTLE DIST INCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY IT IS ONLY IN CASES OF L ACK OF INQUIRY THAT THE CIT CAN EXERCISE HIS REVISIONAL JURISDICTION. AS HELD IN GA BRIEL INDIA LTD. (SUPRA) THE CIT CANNOT INITIATE PROCEEDINGS WITH A VIEW TO START FI SHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. HON BLE BOMBAY HIGH COURT FURTHER OBSERVED IN THE SAID DECISION AS UNDER:- FROM THE AFORESAID DEFINITIONS AS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BEC AUSE ACCORDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY . THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOME -TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS MAKES ENQUIRIE S APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE H IMSELF. THE COMMISSIONER ON PERUSAL OF THE RECORDS MAY BE OF THE OPINION TH AT 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 T HE ONE DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMISS IONER WITH POWER TO RE- EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSE LF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QU ASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT CONCLUSIO N AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. X X X X THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD T O SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY T HE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATIO N A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. X X X X WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE INCOME-TAX OFFI CER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITUR E INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDE NTLY THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE INCOME-TAX OFFICER CANNOT BE H ELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE D ISCUSSION IN THAT REGARD.. ITA N O.3398 /DEL./2010 10 5.5 WHILE ADJUDICATING A SIMILAR ISSUE HONBLE SUPREME COURT IN THE CASE OF CIT VS MAX INDIA LTD. (SUPRA) RELYING UPON ITS EARL IER DECISION IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) HELD AS UNDER: THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IN SECTION 263 OF THE INCOME-TAX ACT 1961 HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSIN G OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. FOR EXAMPLE WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISS IBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIO NER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW. 5.6 SIMILARLY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS R. K. CONSTRUCTION CO. 313 ITR 65 HELD AS UNDER: AS FAR AS LAW IS CONCERNED THE ASSESSING OFFICER H AS TAKEN A PARTICULAR VIEW ON THE BASIS OF EVIDENCE PRODUCED BEFORE HIM. ON THE BASIS OF THE SAID MATERIAL AND MATERIALS WHICH WERE COLLECTED BY THE CIT IN REVISIONAL PROCEEDINGS THE COMMISSIONER HAS TAKEN A DIFFERENT VIEW. HOWEVER IN THE REVISIONAL PROCEEDINGS UNDER SECTION 263 IT IS NOT OPEN FOR THE COMMISSIONER TO TAKE SUCH A DIFFERENT VIEW IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE AT LAW. THIS COURT HAS ALSO TAKEN THE SAME VIEW IN CASE OF ARVIND JEWELLERS WHEREBY THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT WAS QUASHED AND SET ASIDE. . 5.7 IN THE CASE OF CIT V. ARVIND JEWELLERS [20 03] 259 ITR 502 (GUJ) IT WAS OBSERVED THAT THE FINDING OF FACT GIVEN BY THE TRIB UNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 143( 2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANATIONS THE INCO ME-TAX OFFICER HAD COME TO A DEFINITE CONCLUSION. SINCE THE MATERIAL WAS THERE O N RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME-TAX OFFICER AND A PART ICULAR VIEW WAS TAKEN THE MERE FACT THAT A DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE HONBLE HIGH COURT THEREFOR E TOOK THE VIEW THAT THE ITA N O.3398 /DEL./2010 11 ORDER OF REVISION WAS NOT JUSTIFIED. IN THE WORDS O F THE HONBLE HIGH COURT IT WAS HELD AS UNDER: COMING TO THE FACTS OF THE PRESENT CASE IT IS THE FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSESSEE HAS PRODUCED RELEVANT MA TERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UND ER SECTION 142(1) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIALS AND EXPLANATION THE INCOME-TAX OFFICER HAS COME TO A DEFINITE CONCLUSIO N. THE COMMISSIONER OF INCOME-TAX DID NOT AGREE WITH THE CONCLUSION REACHE D BY THE INCOME-TAX OFFICER. SECTION 263 OF THE ACT DOES NOT EMPOWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUSION THAT THE ORDER PASSED BY T HE INCOME-TAX OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERE D BY THE INCOME-TAX OFFICER AND A PARTICULAR VIEW WAS TAKEN THE MERE FACT THAT A DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263 OF THE ACT AND IT CANNOT BE HELD TO BE JUSTIFIED. 5.8 IN CIT V. MEHROTRA BROTHERS 270 ITR 157 (MP) THE HONBLE HIGH COURT GAVE THE STAMP OF APPROVAL TO THE ORDER OF TH E TRIBUNAL WHICH AFTER RELYING ON CIT V. RATLAM COAL ASH CO. [1988] 171 ITR 141 HAD HELD THAT WHEN THE AO CONSIDERED THE RECORDS BEFORE HIM AND COMPLETED THE ASSESSMENT AFTER CONSIDERING THE EVIDENCE FILED AND AFTER HIS SATISF ACTION ABOUT THE GENUINENESS OF CASH CREDITS THE ORDER OF REVISION UNDER SECTION 2 63 ON THE VAGUE GROUND THAT THE AO DID NOT MAKE PROPER ENQUIRY WAS NOT VALID. 5.9 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS DEEPAK MITTAL 324 ITR 411 HELD THAT CHANGE OF OPINION BY REAPPRAISING THE EVIDENCE IS NOT WITHIN THE PARAMETERS OF REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 5.10 IN CIT VS. INTERNATIONAL TRAVEL HOUSE 194 TA XMAN 324(DEL) HONBLE DELHI HIGH COURT WHILE RELYING IN TER ALIA ON THE DECISION OF HONBLE GUJRAT HIGH COURT IN ARVIND JEW ELLERS(SUPRA) OBSERVED THAT THE COMMISSIONER HAD REALLY MADE AN EFFORT TO CAUSE A ROUTINE INQUIRY WITH REGARD TO THE MATTER THAT HAD ALREADY BEEN CONCLUDED AND HE THOUGHT THAT HE HAD THE AUTHORITY TO BEGIN A FRESH LITIGATION BECAUSE OF THE VIEW ITA N O.3398 /DEL./2010 12 ENTERTAINED BY HIM. HONBLE HIGH COURT HELD THAT A MERE CHANGE OF OPINION OR VIEW WOULD NOT ENABLE THE COMMISSIONER TO EXERCISE JURISDICTION UNDER SECTION 263 OF THE ACT MORE SO WHEN THE ASSESSING OFFICER HAD CONSIDERED THE DETAILS AND THE EXPLANATION OFFERED BY THE ASSESSEE. 5.11 IN CIT VS. SUNBEAM AUTO LTD. [2010] 189 TAXM AN 436 (DEL) HONBE JURISDICTIONAL HIGH COURT WHILE ADJUDICATING A SIMILAR ISSUE DREW DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQ UATE ENQUIRY AND ACCORDINGLY OBSERVED AS UNDER: 'AS NOTED ABOVE THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER THE ASSES SING OFFICER DID NOT CONSIDER THIS ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON TH E ASSESSMENT ORDER WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER THAT BY ITSELF WOU LD 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 ASSESSING ORDER IS NOT REQUIRED TO GIVE DETAILED RE ASON 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 ALLOWI NG THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FO R THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN 'LACK OF INQUIRY' AND INADEQUATE INQUIRY'. IF THERE WAS ANY INQU IRY 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 DIFFERENT OPI NION IN THE MATTER.' 5.111 THE HONBLE HIGH COURT IN THE SAID DECISION FURTHE R WENT ON TO OBSERVE THAT : 'THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WASLAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT B Y THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTE RPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED.' 5.12 IN CIT VS. ANIL KUMAR SHARMA [2010] 194 T AXMAN 504 (DEL) WHILE FOLLOWING THEIR OWN DECISION IN SUNBEAM AUTO LTD. (SUPRA) HONBLE DELHI HIGH COURT OBSERVED AS UNDER: ITA N O.3398 /DEL./2010 13 7. IN VIEW OF THE ABOVE DISCUSSION IT IS APPARENT THA T THE TRIBUNAL ARRIVED AT A CONCLUSIVE FINDING THAT THOUGH THE ASSESSMENT ORDE R DOES NOT PATENTLY INDICATE THAT THE ISSUE IN QUESTION HAD BEEN CONSIDERED BY T HE ASSESSING OFFICER THE RECORD SHOWED THAT THE ASSESSING OFFICER HAD APPLIE D HIS MIND. ONCE SUCH APPLICATION OF MIND IS DISCERNIBLE FROM THE RECORD THE PROCEEDINGS UNDER SECTION 263 WOULD FELL INTO THE AREA OF THE COMMISSIONER HA VING A DIFFERENT OPINION. WE ARE OF THE VIEW THAT THE FINDINGS OF FACTS ARRIVED AT BY THE TRIBUNAL DO NOT WARRANT INTERFERENCE OF THIS COURT. THAT BEING THE POSITION THE PRESENT CASE WOULD NOT BE ONE OF LACK OF INQUIRY AND EVEN IF THE INQUIRY WAS TERMED AS INADEQUATE FOLLOWING THE DECISION IN SUNBEAM AUTO LTD.S CASE (SUPRA) 'THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSION ER TO PASS ORDERS UNDER SECTION 263 OF THE SAID ACT MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER'. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. CONSQUENTLY THE APPEAL IS DISMISSED. 5.13 IN CIT VS. LEISURE WEAR EXPORTS LTD. [2010 ] 46 DTR (DEL) 97 HONBLE DELHI HIGH COURT HELD THAT POWER OF REVISI ON U/S 263 OF THE ACT IS NOT MEANT TO BE EXERCISED FOR THE PURPOSE O F DIRECTING THE AO TO HOLD ANOTHER INVESTIGATION WITHOUT DESCRIBING A S TO HOW THE ORDER OF THE AO IS ERRONEOUS. WHERE THE ASSESSMENT ORDER HAS BEEN PASSED BY THE AO AFTER TAKING INTO ACCOUNT ASSESSEE 'S SUBMISSIONS AND DOCUMENTS FURNISHED BY HIM AND NO MATERIAL IS BROUGHT ON RECORD BY THE CIT WHICH SHOWS THAT THERE WAS ANY DI SCREPANCY OR FALSITY IN THE EVIDENCE FURNISHED BY THE ASSESSEE THE ORDER OF THE AO CANNOT BE SET ASIDE FOR MAKING DEEP ENQUIRY ONLY ON THE PRESUMPTION THAT SOMETHING NEW MAY COME OUT. SINCE THERE WAS NOT EVEN A WHISPER THAT THE ORDER WAS ERRONEOUS NOR AS TO HOW THE SAID ORDER WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WHILE THE ONLY OBSERVATIONS OF THE CIT WERE THAT A DEEPER PR OBE BY CALLING FOR MORE DETAILS WAS REQUIRED OR THAT THE MATTER NEEDE D EXAMINATION BY THE AO HONBLE HIGH COURT HELD THAT THIS DID NOT S ATISFY THE INGREDIENTS OF S. 263 OF THE ACT. ACCORDINGLY HON BLE HIGH COURT UPHELD THE FINDINGS OF THE TRIBUNAL SETTING ASIDE THE ORDER OF THE CIT. ITA N O.3398 /DEL./2010 14 5.14 AS REGARDS ABSENCE OF DISCUSSION IN THE ASSE SSMENT ORDER IN CIT VS. NIRMA CHEMICALS WORKS P. LTD. [2009] 309 IT R 67 (GUJ) ALSO A SIMILAR CONTENTION WAS RAISED WHEN THE HONBLE GU JRAT HIGH COURT FOLLOWING THEIR EARLIER DECISION IN RAYON SILK MI LLS V. CIT [1996] 221 ITR 155 CONCLUDED IN THE FOLLOWING TERMS: THE CONTENTION ON BEHALF OF THE REVENUE THAT T HE ASSESSMENT ORDER DOES NOT REFLECT ANY APPLICATION OF MIND AS TO THE ELIGIBILI TY OR OTHERWISE UNDER SECTION 80-I OF THE ACT REQUIRES TO BE REJECTED. AN ASSESSMENT O RDER CANNOT INCORPORATE REASONS FOR MAKING/GRANTING A CLAIM OF DEDUCTION. I F IT DOES SO AN ASSESSMENT ORDER WOULD CEASE TO BE AN ORDER AND BECOME AN EPIC TOME. THE REASONS ARE NOT FAR TO SEEK. FIRSTLY IT WOULD CAST AN ALMOST IMPOS SIBLE BURDEN ON THE ASSESSING OFFICER CONSIDERING THE WORKLOAD THAT HE CARRIES A ND THE PERIOD OF LIMITATION WITHIN WHICH AN ORDER IS REQUIRED TO BE MADE; AND SECONDLY THE ORDER IS AN APPEALABLE ORDER. AN APPEAL LIES WOULD BE FILED O NLY AGAINST DISALLOWANCES WHICH AN ASSESSEE FEELS AGGRIEVED WITH. AS FAR AS ABSENCE OF DISCUSSION IN THE ASSESSMENT O RDER IS CONCERNED THIS IS WHAT HAS BEEN LAID DOWN BY THIS COURT IN THE CASE O F RAYON SILK MILLS V. CIT [1996] 221 ITR 155 : 'IN THE FIRST INSTANCE IT WAS CONTENDED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE VERY PREMISE ON WHICH ORDER UNDER SECTION 263 WAS MADE AGAINST THE ASSESSEE NAMELY THAT THE INCOME-TAX O FFICER HAS NOT AT ALL EXAMINED THE GOODWILL ACCOUNT IS NOT EXISTE NT. ACCORDING TO HIM IT IS APPARENT FROM THE RECORD THAT THE GOODWILL ACCOUNT WAS THOROUGHLY EXAMINED BY THE INCOME-TAX OFFICER BEFORE MAKING THE ASSESSMENT AND AFTER EXAMINING WHEN HE ACCEPTED THE CONTE NTION OF THE ASSESSEE ITS DISCUSSION DID NOT FIND PLACE IN THE ASSESSMEN T ORDER AS NO ADDITIONS WERE GOING TO BE MADE OR NO MODIFICATI ONS IN THE RETURN FILED BY THE ASSESSEE WERE REQUIRED TO BE MADE I N THAT REGARD. THIS CONTENTION OF THE ASSESSEE APPEARS TO BE WELL-FOUNDED . IT IS TRUE THAT THE ASSESSMENT ORDER DOES NOT SPEAK ABOUT THE EXAMI NATION OF GOODWILL ACCOUNT AS SUCH. HOWEVER AS WE HAVE NOTICED ABOVE THE ASSESSEE IN HIS REPLY TO THE SHOW-CAUSE NOTICE UNDER SECTION 2 63 HAD SPECIFICALLY MENTIONED THAT THE ENTIRE MATTER WAS SCRUTI NISED AND ACCEPTED WHILE PASSING THE ASSESSMENT ORDER. OUR ATTENTION WAS ALSO DRAWN TO ANNEXURE 'D'. A SUBMISSION MADE BY THE ASSESSEE TO THE INCOME-TAX OFFICER SURAT DATED OCTOBER 18 1976 REG ARDING THE ASSESSMENT YEAR 1974-75 GIVING DETAILED CHRONOLOGICAL DAT A OF THE CONSTITUTION OF THE FIRM ON NOVEMBER 11 1968 INDUCTI ON OF FOUR MORE ITA N O.3398 /DEL./2010 15 PARTNERS ON NOVEMBER 7 1972 THE CREATION OF GOODWIL L IN THE BOOKS OF ACCOUNT OF THE FIRM BY DEBITING THE GOODWILL ACCOUNT AN D CREDITING THE OLD PARTNERS' CAPITAL ACCOUNTS IN THEIR PROFIT SHARING RA TIO ON THAT DATE FORMATION OF A PRIVATE LIMITED COMPANY IN THE NAME O F RAYON SILK MILLS PRIVATE LIMITED AND ITS INDUCTION INTO THE FIRM AS PA RTNER BY THE DEED OF PARTNERSHIP DATED OCTOBER 27 1973 AND THE DISSOLUT ION OF THE PARTNERSHIP FIRM ON FEBRUARY 23 1974 LEAVING THE P RIVATE LIMITED COMPANY AS A SOLE PROPRIETOR THEREOF AND THE VALUATION OF THE BUSINESS AT THE BOOK VALUE AS ON THAT DATE. AFTER GIVING THE CHRONOLOGICAL SEQUENCE OF EVENTS THE ASSESSEE ALSO CONTENDED IN HIS SUBMI SSION BEFORE THE INCOME-TAX OFFICER THAT THERE WAS NO ACTUAL TRANSFER OF ANY ASSET INASMUCH AS WHEN A PARTNER IS ADMITTED INTO THE F IRM NO TRANSFER TAKES PLACE. IT WAS ALSO CONTENDED THAT NO CASH TRANSFER TOOK PLACE FROM PERSON TO PERSON AND THE TRANSFER AND THE DISSOLUTI ON OF THE FIRM ALSO DID NOT RESULT IN ACCRUAL OF CAPITAL GAINS. IN THE F ACE OF THIS MATERIAL ON RECORD IT IS DIFFICULT TO EXPLAIN THAT T HE ASSESSMENT ORDER WAS MADE WITHOUT MAKING ANY ENQUIRY INTO THE GOODWIL L ACCOUNT OF RS. 10 75 000.' THERE IS ANOTHER ASPECT OF THE MATTER. THE ASSESSEE HAD CH ALLENGED JURISDICTION OF THE COMMISSIONER OF INCOME-TAX TO EXERCISE POWERS UNDER SECTION 263 OF THE ACT. FOR AN ORDER OF THE ASSESSIN G OFFICER TO BE INTERFERED WITH IN EXERCISE OF REVISIONAL POWERS THE COMMISSIONER OF INCOME-TAX HAS TO FIND IN THE FIRST INSTANCE THAT THE O RDER IS ERRONEOUS AND SECONDLY THE ORDER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CONDITIONS ARE TWIN CONDITIONS AS HELD BY THE APEX CO URT AND BOTH OF THEM HAVE TO BE FULFILLED BEFORE THE COMMISSIONER OF INCOME-TAX CAN EXERCISE JURISDICTION UNDER SECTION 263 OF THE ACT. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC) THE APEX COURT HAS HELD: 'THE PHRASE 'PREJUDICIAL TO THE INTEREST S OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEO US ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUE NCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE WHEN AN INCOME- TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER D OES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJ UDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW.' APPLYING THE AFORESAID TESTS TO THE FACTS O F THE CASE IT IS NOT POSSIBLE TO UPHOLD THE ORDER OF THE TRIBUNAL AS REGARDS JURISDI CTION AFTER CONSIDERING THE LAW ENUNCIATED BY THE APEX COURT. THE ASSESSING OFFICER AFTER MAKING DUE INQUIRIES ITA N O.3398 /DEL./2010 16 AS NOTED HEREINBEFORE ADOPTED ONE VIEW AND GRANTED PARTIAL RELIEF UNDER SECTION 80-I OF THE ACT. THE COMMISSIONER OF INCOME-TAX TAK ES A DIFFERENT VIEW OF THE MATTER. HOWEVER THAT WOULD NOT BE SUFFICIENT TO PE RMIT THE COMMISSIONER OF INCOME-TAX TO EXERCISE POWERS UNDER SECTION 263 OF THE ACT BECAUSE WHEN TWO VIEWS ARE POSSIBLE AND THE COMMISSIONER OF INCOME-T AX DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER THE ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. T HAT IS NOT THE POSITION IN THE PRESENT CASE. IN FACT EVEN THE PARTIAL DENIAL OF RE LIEF UNDER SECTION 80-I OF THE ACT HAS BEEN FOUND TO BE INCORRECT BY THE APPELLATE AUT HORITY. THEREFORE EXISTENCE OF TWO VIEWS STANDS ESTABLISHED. IN THE AFORESAID CIRC UMSTANCES THE COMMISSIONER OF INCOME-TAX COULD NOT HAVE EXERCISED JURISDICTION UNDER SECTION 263 OF THE ACT AS PER SETTLED LEGAL POSITION. 6. IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS BY THE HONBLE JURISDICTIONAL HIGH COURT AND OTHER HIGH COURTS I T IS APPARENT THAT THE CIT HAS TO GIVE REASONS TO JUSTIFY THE EXERCISE OF SUO MOTO REVISIONAL POWERS BY HIM TO RE- OPEN A CONCLUDED ASSESSMENT. IN THE INSTANT CASE A NOTICE WAS ISSUED BY THE AO AND THE ASSESSEE SUBMITTED A DETAILED REPLY VID E LETTER DATED 16.10.2008. THIS FACT HAS NOT BEEN DISPUTED BEFORE US BY THE LD . DR. APPARENTLY THE AO HAD NOT SHIRKED HIS RESPONSIBILITY OF EXAMINING AND INV ESTIGATING THE CASE. AFTER ENQUIRY THE AO WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE REGARDING TAXATION OF PROFIT FROM SHARES AS SHORT/LONG TERM C APITAL GAIN. ADMITTEDLY THE ASSESSEE DEALT WITH ONLY ONE SCRIP AND IN THE PRECE DING YEARS THESE SHARES HAVE BEEN ACCEPTED AS INVESTMENT AND NOT AS STOCK IN TRA DE. THE LD. CIT WHILE OBSERVING THAT PRIMA FACIE THE ASSESSEES SUBMISSIO N HAD SOME STRENGTH AND NEEDED APPROPRIATE CONSIDERATION AS PER LAW PROCE EDED TO SET ASIDE THE ASSESSMENT ON THE GROUND OF LACK OF ENQUIRY/INVEST IGATION ON THE PART OF THE AO. THE LD. CIT TOTALLY IGNORED THE AFORESAID REPLY DAT ED 16.10.2008 FILED BY THE ASSESSEE BEFORE THE AO. MERE CHANGE OF OPINION OR V IEW WOULD NOT ENABLE THE CIT TO EXERCISE JURISDICTION U/S 263 OF THE ACT MOR E SO WHEN THE AO HAD CONSIDERED THE DETAILS AND THE EXPLANATION OFFERED BY THE ASSESSEE . C HANGE OF OPINION BY REAPPRAISING THE EVIDENCE IS NOT WITHIN THE PARA METERS OF REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT. IN VIEW THEREOF WE SET ASIDE THE IMPUGNED ORDER U/S 263 OF THE ACT AND QUASH THE SAME. ITA N O.3398 /DEL./2010 17 THEREFORE GROUND NOS. 1 TO 2.3 IN THE APPEAL ARE A LLOWED. AS A COROLLARY ALTERNATIVE GROUND NO. 3 DOES NOT SURVIVE FOR OU R ADJUDICATION . 7.. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND IN THE APPEAL ACCORDINGLY THIS GROUND IS DISMISSED. 8.. NO OTHER SUBMISSION OR ARGUMENT WAS MAD E BEFORE US. 9. IN THE RESULT APPEAL IS ALLOWED. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. M/S GUPTA SPINNING MILLS PVT. LTD. FLAT NO .532 NEELKANTH APARTMENTS SECTOR-13 ROHINI DELHI 2. DCIT CIRCLE 12(1) C.R. BUILDING NEW DELH I 3. CIT CONCERNED. 4. DR ITAT C BENCH NEW DELHI 5. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI ORDER PRONOUNCED IN OPEN COURT