122 ITD 228 Per Mahavir Singh, Judicial Member.: Both these appeals by assessee r e directed against two separate Orders passed by Commissioner of Income-tax-II, Ahmedabad ["CIT" for short] both dated 31-01-2007 for assessment years 1999-2000 and 2000-2001. following grounds which are common for both years [except change in figures] have been raised by assessee: 1.In facts and circumstances of case as well as in law, Ld. Commissioner of Income-tax-II, Ahmedabad grossly erred in exercising reversionary jurisdiction under section 263 of Income-tax Act and in passing order under section 263 of Income-tax Act dated 31-1-2007 whereby order of assessment passed by Assessing Officer under section 143(3) read with section 147 on 15-12-2004 is set aside. 2.In facts and circumstances of case as well as in law, Ld. Commissioner of Income-tax-ll, Ahmedabad grossly erred in holding that order under section 143(3) read with section 147 passed by Assessing Officer on 15-12-2004 are erroneous and prejudicial to interest of revenue. 3.In facts and circumstances of case as well as in law, Ld. Commissioner of Income-tax-II, Ahmedabad grossly erred in holding that Assessing Officer while passing order under section 143(3) read with section 147 did not properly examine issue whether claim for bad debt of Rs. 34.90 crore was admissible or not, whereas in point of facts, Assessing Officer had examined issue of admissibility of deduction of claim for bad debt in depth and assessment order under section 143(3) read with section 147 was passed with approval of Addl. CIT, Range-4, Ahmedabad. 4.In facts and circumstances of case as well as in law, Ld. Commissioner of Income-tax-II, Ahmedabad grossly erred in holding that appellant s claim for deduction of bad debt of Rs. 34.90 crore is not admissible disregarding fact that appellant company has fulfilled all conditions as per provisions of section 36(1)(vii) read with section 36(2) of Income-tax Act. 2. brief facts of case are that assessee is limited company incorporated under Companies Act, 1956 and is engaged among other thing i n business of providing technical and management consultancy services, offering services to National and International Agencies for social and Economical Services. As per Memorandum of Association company was also authorized to carry out financing and investment and trading in shares and securities, etc. 3. For assessment year 1999-2000, assessee-company filed its return of income on 30-12-1999 declaring total income at Rs. 9,61,660 which was processed under section 143(1) on 1-6-2001 accepting returned income. Assessing Officer on perusal of return, observed, that assessee had claimed amount of Rs. 34.90 crores as bad debt written off, and since no details/evidence were available to show that amount written off and debited to P&L Account had really become bad and irrecoverable, assessment was reopened under section 147 of Income-tax Act, 1961 ["the Act" hereinafter] vide Notice issued under section 148 of Act on 15-10-2003. Thereafter, in response to notices issued under section 143(2), assessee caused appearance before Assessing Officer and furnished all details and information as called for by Assessing Officer to his fullest satisfaction. Assessing Officer after due verification of details and after necessary examination as to admissibility of claim for deduction of bad debt written off amounting to Rs. 34.90 crore and also fulfillment of conditions as laid down in provisions of section 36(1)(vii) read with section 36(2) of Act allowed assessee s claim for bad debts and passed assessment order under section 143(3) read with section 147 on 16-12-2004. 3.1 Since first common issue is emerging out of these two appeals is as regards to jurisdiction assumed by CIT under section 263 and for sake of brevity, we will discuss facts as narrated in assessment year 1999-2000 which is lead case and facts are exactly identical, will apply to other year also. 4. Subsequently, CIT-II, Ahmedabad issued notice under section 263 of Act dated 19-10-2006. show-cause issued by CIT was to state that order passed by Deputy CIT, Circe-4, Ahmedabad dated 16-12-2004 allowing claim of bad debts is erroneous in so far as it is prejudicial to interest of revenue on basis of reasons given in show-cause notice. relevant show-cause notice of CIT-II, Ahmedabad reads as under: "The assessment under section 143(3) read with section 147 in your case was completed on 16-12-2004 at income of Rs. 9,61,650. Assessing Officer had accepted your claim for bad debt amounting to Rs. 34.90 crores after considering your explanation and details filed. From perusal of your record, it appears that acceptance of your claim of bad debt is erroneous in so far as it is prejudicial to interest of revenue. It is clear from record that you have not been engaged in business of banking or money lending. Even resolution regarding carrying out of financing and investment business was passed in meeting of Board of Directors held on 20-02-1996. On contrary, change in memorandum of association can be effected only in accordance with sections 16, 17, 17A, 18 and 19 of Companies Act. In your case, aforesaid provisions of Companies Act had not been complied with. Further, most of advances made to party, M/s. Rajbal Finance Pvt. Ltd. were prior to date of resolution. 2. As per provisions of section 36(1)(vii) read with section 36(2) of Act, only such bad debt thereof can be allowed as deduction which has been offered for taxation in any of years, unless and until such debt represents money lent in ordinary course of business of banking or money lending which is carried on by assessee. essential conditions remained unfulfilled in your case. 3. No details or supporting documents are available on record to show that debt in question was bad debt and irrecoverable. assessee continued to grant further advance to party without effecting recovery of earlier advance. 4. Considering facts and circumstances as mentioned above, it appears that order dated 16-12-2004 passed by Deputy CIT, Circle-4, Ahmedabad allowing claim of bad debt is erroneous in- sofar as it is prejudicial to interest of revenue. You are hereby given opportunity to represent your case and show-cause why action under provisions of section 263 should not be taken in your case. date of hearing is fixed for 3-11-2006 at 3.00 p.m. in my office, where upon you may appear personally or through authorized representative and may also file written submissions if any on said date." In response to show-cause notice assessee vide letters dated 21- 11-2006, 24-11-2006 and 6-12-2006 contested show-cause notice issued by CIT under section 263 and relevant portion, i.e., paras-2 and 3 of letter dated 24-11-2006 at page 55 of paper book, reads as under: "It is to be submitted that company is engaged in business of financing and investment activity which is duly stated in statement of Income- tax filed. Further, as regards point No. 1 regarding fulfillment of provisions of sections 16 to 19 of Companies Act, it is to be submitted that during period when major advances were given company was private limited company wherein these provisions are not applicable. Further, activities are covered under ancillary objects whereby these provisions are not applicable. Therefore, provisions of Companies Act have not been complied with is not correct. company is in business of money-lending and finance and company has also advanced funds to M/s. Rajbal Finance (P.) Ltd. over period of time. company has also earned income over period of time. Further, please note that as loan was given to M/s. Rajbal Finance (P.) Ltd. in ordinary course of money lending, it is not necessary that income has to be accounted for against said advance. In view of this, same is duly allowable under section 36(2) which clearly states that money when advanced represents money lent in ordinary course of business, same is allowable. Further, it is on account of advances, on account of ordinary course of business and hence said loss incidental to business activities of company and hence duly allowable under section 28. Reliance is placed on decision of Gujarat High Court in case of Abdul Razak & Co. 136 ITR 823 and Equitorial (P.) Ltd. [1994] Taxation 37(3) - 82." CIT considered claim of assessee and observed that as per Memorandum of Association and Articles of Association of company dated 17-10-1979, which is available on record it can be seen that Main Object of assessee was never to act as investment company, much less to carry out business of money lending. It seems that Assessing Officer during course of re-assessment proceedings relied on copy of resolution passed by Board of Directors dated 20- 2-1996 authorizing assessee-company to carry out busi- ness of financing and investment and thereby trading in quoted shares/stock/debentures/securities and other financial acti-vities. assessee-company entered into financial transactions with M/s. Rajbal Finance (P.) Ltd., since financial year 1992-93 much prior to financial year 1994-95, i.e., year from which assessee claimed to be entitled to carry on financing business, vide resolution dated 20-2-1996 of Board of Directors. Further, assessee-company had passed resolution regarding write off of amounts of Rs. 34.95 crores due from M/s. Rajbal Finance (P.) Ltd. in books of accounts of assessee-company in its meeting held on 15-3-1999. CIT has not accepted contention of assessee that it is loss on account of advances given in ordinary course of business and said loss is incidental to business activities of company by giving reasoning that assessee is not involved in banking or money lending business, etc. assessee s another contention was that said bad debt, if not allowable under section 36(1)(vii), then same is allowable as deduction as business loss under section 28 of Act. Accordingly, he held that it cannot be held that alleged loss incurred by assessee was on account of revenue/trading but same is in nature of capital loss. CIT has given his findings in paras 19.1 to 19.6 as under: "19. I find that Assessing Officer has not appreciated full facts of case and legal requirements while completing re-assessment proceedings for following reasons: 19.1 assessee being corporate entity has to strictly carry out business as authorized by its Memorandum of Association. company has to keep itself within limits set by Memorandum. Any alterations in Memorandum which is considered as soul of company can be made in only certain specified conditions as contemplated in section 6 of Companies Act. Further, proceedings for alteration in Memorandum cannot be completed by passing resolution mere by Board of Directors, but for same there is elaborate procedure as contemplated in sections 16, 17, 17A, 18 and 19 of Companies Act, which is applicable in case of any company registered under Companies Act. assessee s contention that provisions are not applicable in case of private limited company is incorrect and misleading. 19.2 Section 17 of Companies Act provides that any alteration in Memorandum can be made for purposes specified therein, only by special resolution passed by its members and after confirmation by Company Law Board. Section 18 of Companies Act provides that company should file copy of Special Resolution passed by its members authorizing alterations in Memorandum within one month from date of such resolution. Section 19 of Companies Act stipulates that no alterations referred in section 17 shall have any effect until it is duly registered in accordance with provisions of section 18 of Companies Act. 19.3 From perusal of records in instant case it can be seen that nothing is on record which suggests that assessee company has altered its Memorandum by special Resolution, after approval of Company Law Board, and has registered same with Registrar of Companies. above referred copy of Resolution of Board of Directors dated 20-2-1996 is mere self serving document which cannot be relied upon. Otherwise also said Resolution of Board of Directors has no legal sanctity as far as alteration in Memorandum is concerned. 19.4 Without prejudice to above it is also explained that otherwise also said resolution of Board of Directors is dated 20-2-1996 and most of advances made in instant case is much prior to said date. Even as per Resolution, assessee company has decided to carry out business of financing and investment with effect from financial year 1994-95 whereas advances in instant case were started much prior i.e., from financial year 1992-93. Further, said Resolution of Board of Directors allegedly authorizes assessee company to carry out financial activities and not money lending business. 19.5 provisions of section 36(2) relevant to assessment year under consideration are re-produced below: "36(2) In making any deduction for bad debt or part thereof, following provisions shall apply (i)no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing income of assessee of previous year in which amount of such debt or part thereof is written off or of earlier previous year, or represents money lent in ordinary course of business of banking or money-lending which is carried on by assessee." 19.6 From perusal of section 36(1)( vii) read with section 36(2) of Act it can be seen that only such bad debts or part thereof can be allowed as deduction which has been offered for taxation in any of years, unless and until such debts represent money lent in ordinary course of business of money-lending which is carried on by assessee. bad debt claimed by assessee has not been shown as income in preceding years nor can assessee be considered to have carried on business of money lending. money cannot also be said to be lent in ordinary course of business of banking or money lending. Thus, main conditions laid down in Act are not satisfied so far as claim of assessee is concerned. claim of assessee is therefore not tenable under section 36(2) of Act. There is specific section for allowing claim of bad debts which is section 36(2). When claim is not allowable under Act under specific section dealing with that item claim, then general provisions will not be applicable and same cannot be allowed under any other section of Act. Reliance in this respect is placed on judgement of Hon ble Bombay ITAT in case of Shri Harshad J. Chokshi v. ACIT 52 ITD 511 (Bom.), whereby similar arguments of assessee were rejected. In view of this, assessee s second contention of claim of business loss under section 28 of Income-tax Act is also not acceptable/allowable." And in view of this, finally, he held order passed by Assessing Officer under section 143(3) read with section 147 dated 16-12-2004 as erroneous and prejudicial to interest of revenue vide para-23 of his order which reads as under: "23. order under section 143(3) read with section 147 dated 16-12- 2004 passed in case of assessee did not consider above factual position as well as legal provisions of section 36(1)(vii) and section 36(2) of Income-tax Act, 1961. Assessing Officer has also failed to consider f c t that assessee-company has failed to comply with legal provisions/basic requirements as contemplated in section 16, 17, 17A, 18 & 19 of Companies Act, which are applicable in case of any company registered under Companies Act. Thus, Assessing Officer has wrongly allowed assessee s claim of bad debts, without considering overall facts of case and relevant legal provisions/requirements in this context. Therefore, order under section 143(3) read with section 147 of Income-tax Act dated 16-12-2004 passed in this case is held to be erroneous insofar as it is prejudicial to interest of revenue in terms of section 263 of Income-tax Act, 1961. claim of assessee regarding Bad debts to extent of Rs. 34,90,000 has been wrongly allowed in said order passed under section 143(3) read with section 147, which requires to be disallowed. Accordingly, order passed under section 143(3) read with section 147 on 16-12-2004 is set aside to file of Assessing Officer with direction to Assessing Officer to reframe assessment after giving due opportunity to assessee to represent its case and after considering all relevant provisions of law in this regard." 5. Aggrieved, assessee has preferred appeal before us. learned counsel of assessee argued that order passed by CIT under section 263 is illegal and void ab initio. It was argued that as per provisions of section 263 both conditions that order to be revised should be erroneous so as to prejudicial to interest of revenue. Even if one condition is not satisfied, assessment order cannot be revised. He argued that Assessing Officer has passed assessment order and allowed deduction of bad debts after due application of mind and due appreciation of facts and details of case. assessee during course of assessment proceedings has made proper disclosure about nature of business, nature of bad debts and submitted all necessary details during course of assessment proceedings vide various submissions submitted before Assessing Officer. learned counsel of assessee has drawn our attention to paper book and stated that copy of account of M/s Rajbal Finance Pvt. Ltd. relating to debts from date loan was advanced till it was written off was also filed. He referred to letter dated 7-12-2004 where details are given and details from that letter read as under: "As regards advances given to Rajbal Finance (P.) Ltd., and written off during year, we would like to state that company has started giving loans to above company since 1992-93. We are submitting herewith detailed transactions of loans given and income earned thereof right from inspection of transaction with said company as per Annexure-1, which please find in order. Further, please note that since 2 - 3 years, financial position of company was not so good and hence it has neither given any consideration against loans received nor has it paid any consideration for loans given. As can be found from attached statement, company has earned income of Rs. 3,87,83,991 on loans given to said company from time to time." And this letter was written in response to show-cause letter dated 6-12- 2004 issued by Deputy CIT, Circle-4, Ahmedabad and relevant context of letter under para-2 reads as under: "2. In your letter dated 19-10-2004 you have stated that company, over period advanced Rs. 59.25 Crores to Rajbal Financial (P.) Ltd. In this regard, you are requested to furnish copy of accounts of said Rajbal Financial (P.) Ltd. for past three years and also produce proof that bad debts written off in name of said party has been considered as your income in any of earlier assessment year. Please comply within two days from receipt of this letter." details of loan transactions with M/s. Rajbal Finance (P.) Ltd., as referred to by learned counsel of assessee, are given at page-98 of assessee s paper book and relevant details are reproduced for sake of clarity: MATRIX LOGISTICS LIMITED Year-wise details of loan transactions with M/s. Rajbal Financial (P.) Ltd. "Nobles" A-Wing, 4th Floor, Ashram Road, Ahmedabad-9 PAN No. AAACR 7469P, CIR. 8, AHMEDABAD Sr. Year Opening Amount Amount Income Closing Balance Paid Received earned Balance 1. 1992- 0 11500 0 0 15500 93 2. 1993- 15500 67533555 99800 2106042 69555297 94 3. 1994- 69555297 168775500 1318000 25730365 262743162 95 4. 1995- 262743162 14848847 7992000 109477584 414187223 96 5. 1996- 414187223 178683466 5937500 0 586933189 97 6. 1997- 586933189 5645541 0 0 592578730 98 7. 1998- 592578730 16815029 167955024 0 592598735 99 Total 585953068 32142324 38783991 In view of these factual arguments, learned counsel of assessee fairly stated that complete details were available before Assessing Officer at time of framing of original assessment and Assessing Officer after applying mind and appreciating facts has allowed claim of assessee in regard to bad debts. He argued that as per Resolution dated 20-2-1996 it was resolved to carry out business of financing and investments and he referred to Resolution which is given at assessee s paper book at page-96 and relevant context of Resolution reads as under: "Certified true copy of resolution passed at meeting of board of directors of company held on 20th February, 1996 Resolved that company do carry out business of financing and investments and thereby trading in quoted shares/stock/ debentures/securities and other financial activities." learned counsel of assessee further argued that as per Incidental or Ancillary Objects to attainment of above main Objects are very much or Ancillary Objects to attainment of above main Objects are very much available regarding investments and lending, investing or otherwise employing or dealing with money belonging to or entrusted to Company. Incidental Clauses 9 and 18 are given in Memorandum of Association of Company. relevant Clauses 9 and 18 read as under: "9. To carry on business of investment company and to buy, underwrite and to invest in and acquire and hold shares, stocks, debentures, debenture stocks, bonds, obligations and securities issued or guaranteed by any company constituted or carrying on business in India or elsewhere and debentures, debenture stocks, bonds, obligations and securities issued or guaranteed by any Government, State, Dominion, Sovereign, Ruler, Commissioners, Public Body or authority supreme, municipal, local or otherwise or firm or person whether in India or elsewhere and to deal and turn to account same". "18. To lend, invest or otherwise employ or deal with money belonging to or entrusted to Company upon securities and shares or other movable or immovable property or without security upon such terms and in such manner as m y be thought proper and from time to time very such transactions and investments in such manner as Directors may think fit." In view of these facts he argued that assessee s case is covered by decision of Hon ble Apex Court in case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, wherein it is held: "A bare reading of provisions of section 263 makes it clear that prerequisite to exercise of jurisdiction by CIT suo motu under it, is that order of ITO is erroneous insofar as it is prejudicial to interest of revenue. CIT has to be satisfied of twin conditions, namely, (i) order of Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to interests of revenue. It is only when order is erroneous that section will be attracted. incorrect assumption of facts or incorrect application of law will satisfy requirement of order being erroneous. If due to erroneous order of ITO, revenue is losing tax lawfully payable by person, it will certainly be prejudicial to interest of revenue. phrase "prejudicial to interests of revenue" has to be read in conjunction with erroneous order passed by Assessing Officer. Every loss of revenue as consequence of order of Assessing Officer cannot be treated as prejudicial to interests of revenue. Where two views are possible and ITO has taken one view with which CIT does not agree, it cannot be treated as erroneous order prejudicial to interests of revenue unless view taken by ITO is unsustainable in law." In view of these facts he argued that Assessing Officer has allowed deduction to assessee after examining claim of assessee along with relevant provisions of Act including conditions laid down under section 36(2) read with section 36(1)(vii) of Act duly complied with by assessee and specific finding in this regard was given in assessment order passed under section 143(3) read with section 147 of Act. Apart from this learned counsel of assessee relied on latest decision of Hon ble Supreme Court in case of CIT v. Max India Ltd. [2007] 295 ITR 282, copy of which is placed on record, wherein Hon ble Apex Court has held that wherever two views are possible, CIT cannot exercise powers under section 263. Hon ble Supreme Court has held as under: "At this stage we may clarify that under para 10 of judgment in case of Malabar Industrial Company Limited this Court has taken view that phrase prejudicial to interest of revenue under section 263 has to be read in conjunction with expression erroneous order passed by Assessing Officer. Every loss of revenue as consequence of order of Assessing Officer cannot be treated as prejudicial to interest of revenue. For example, when Income-tax Officer adopted one of courses permissible in law and it has resulted in loss of revenue; or where two views are possible and Income-tax Officer has taken one view with which Commissioner does not agree, it cannot be treated as erroneous order prejudicial to interest of revenue, unless view taken by Income- tax Officer is unsustainable in law. According to learned Additional Solicitor General on interpretation of provision of section 80HHC(3) as it then stood view taken by Assessing Officer was unsustainable in law and therefore Commissioner was right in invoking section 263 of Income-tax Act. In this connection he has further submitted that in fact 2005 amendment which is clarificatory and retrospective in nature itself indicates that view taken by Assessing Officer at relevant time was unsustainable in law. We find no merit in said contentions. Firstly it is not in dispute when order of Commissioner was passed there were two views on word profit in that section. problem with section 80HHC is that it has been amended eleven times. Different views existed on day when Commissioner passed above order. Moreover mechanics of section have become so complicated over years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract provision of section 263 particularly when as stated above we have to take into account position of law as it stood on date when Commissioner passed order dated 5-3-1997 in purported exercise of his powers under section 263 of Income-tax Act." In view of these arguments, learned counsel of assessee stated that assessment framed by Assessing Officer under section 143(3) after due deliberation and considering fact as regards to claim of bad debts, assessment order cannot be erroneous so as to prejudicial to interests of revenue and CIT has no powers to revise same. 6. On other hand, learned DR argued that in Memorandum of Association of assessee-company Main Object to be pursued is not as regards to lending of money and only ancillary and incidental object is to carry out business of lending and investing money belonging to or entrusted to Company. Even as per provisions of sections 16, 17, 17A, 18 and 19 there is procedure for alteration of Main Objects and assessee-company has not followed said procedure as prescribed in provisions of Companies Act and they have merely relied on Resolution passed in meeting of Board of Directors of Company held on 20-2-1996. He argued that this Resolution is in violation of main provisions of Companies Act, i.e., sections 16, 17, 17A, 18 and 19. He further argued that from bare reading of assessment order it can easily be inferred that Assessing Officer has not gone into details filed by assessee at stage of assessment and once Assessing Officer has not gone into details, CIT(A) can rightly initiate proceedings for revision of assessment under section 263 of Act. He has drawn our attention to assessment order where Assessing Officer has summarily decided issue about allowance of bad debts in para-4 of assessment order. Even Assessing Officer has not made any inquiry regarding this bad debt and in absence of any inquiry order is erroneous so as to prejudicial to interest of revenue. In view of these arguments, learned DR argued that assessment order framed by Assessing Officer under section 143(3) read with section 147 is erroneous as well as prejudicial to interest of revenue and he relied on following case law: In case of Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323, wherein Hon ble Apex Court has held that where assessee is assessed on income voluntarily returned, it is not prejudicial to interests of revenue only if it is found that assessment was made on basis that income had been earned by assessee which was assessable. Where income has not been earned and is not assessable, merely because assessee wants it to b e assessed in his or her hands, in order to assist some one else who would have been assessed to larger amount, assessment so made will be erroneous and prejudi- cial to revenue and Commissioner has jurisdiction under section 33B of Income-tax Act, 1922. Before Hon ble Apex Court in this case two views are not possible. Here only one view is possible even in case where whether particular person is assessed on larger amount or smaller amount it is immaterial. Hence, this decision is distinguishable on facts. In case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), Hon ble Apex Court has held that it is not necessary for Commissioner to make further inquiries before cancelling assessment order of ITO. Commissioner can regard order as erroneous on ground that in circumstances of case ITO should have made further inquiries before accepting statements made by assessee in his return. reason is obvious. position and function of ITO is very different from that of civil court. statements made in pleading proved by minimum amount of evidence may be adopted by civil court in absence of any rebuttal. civil court is neutral. It simply gives decision on basis of pleading and evidence which comes before it. ITO is not only adjudicator but also investigator. He cannot remain passive in face of return which is apparently in order but calls for further inquiry. It is his duty to ascertain truth of facts stated in return when circumstances of case are such as to provoke inquiry. It is because it is incumbent on ITO to further investigate facts stated in return when circumstances would make such inquiry prudent that word "erroneous" in section 263 include failure to make such enquiry. order becomes erroneous because such inquiry has not been made and not because there is anything wrong with order if all facts stated therein are assumed to be correct. In this case facts are that Assessing Officer has not carried out relevant inquiry but in present case before us Assessing Officer passed assessment order after considering submissions and details and after making thorough inquiry. In case of Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 Hon ble Apex Court has held that all additional material was supporting material and did not constitute basic grounds on which order under section 33B was passed, and even if facts which Commissioner introduced regarding inquiries made by him had been indicated to assessee result would have been same. assessee had not in any way suffered from failure of Commissioner to indicate results of inquiries. Moreover, assessee would have full opportunity of showing to ITO whether income assessed in assessment orders which were originally passed was correct or not. assessee could not, therefore, be said to have been denied opportunity of showing cause against grounds and materials and rules of natural justice were not violated. As facts before Hon ble Apex Court are that Assessing Officer has failed to make inquiry and even assessment order passed was erroneous but in present case before us facts are distinguishable, in view of facts narrated above. 7. We have heard rival contentions and gone through facts and circumstances of case. We have also perused case records including assessment order framed by Assessing Officer under section 143(3) read with section 147 dated 16-12-2004 and revision order passed by CIT under section 263. We have also perused documents filed by assessee, case law referred by both sides as well as two paper books consisting of pages 1 to 107 and pages 1 to 58. Assessing Officer while framing assessment has gone into issue of allowance of bad debts and assessee was asked to furnish complete details of bad debts written off, justification for writing off of bad debts and also satisfaction of provisions of section 36(2)/36(1)(vii) of Act. assessee has filed complete details of loans advanced to Rajbal Finance (P.) Ltd. during financial years 1992-93 to 1998- 99 and assessee-company has earned income by way of interest during these years and assessee has offered same in total income in respective assessment years. Assessing Officer while framing assessment has considered this aspect and also considered aspect of financial position of Rajbal Finance (P.) Ltd., and considered that financial position is not good and amount advanced has become bad. It is also finding of fact by Assessing Officer that these loans have been given in ordinary course of business of financing in view of Board s Resolution of Company passed as on 20-2-1996. Even Assessing Officer has considered Resolution of Board of Directors of Company for writing off of bad debts dated 15-3-1999. As per show-cause notice allegation of CIT is that assessee is not engaged in business of banking or money-lending and moreover change in Memorandum of Association has been effected by Resolution of Board of Directors dated 20-2-1996 in violation of provisions of sections 16, 17, 17A, 18 and 19 of Companies Act. It is allegation of CIT that provisions of sections 36(1)(vii) and 36(2) of Act are not satisfied and no details or supporting documents were filed before Assessing Officer to prove that debt has become bad and irrecoverable. Accordingly, CIT issued show-cause notice under provisions of section 263 of Act for giving opportunity to assessee as regards to claim of bad debts but CIT finally revised assessment under section 263 by holding that order passed by Assessing Officer allowing claim of bad debts is erroneous in so far as it is prejudicial to interest of revenue. 8. Now we have to go to provisions of section 36(1)(vii)/36(2) as relevant to assessment year under consideration. relevant provisions read as under: "36(1) deductions provided for in following clauses shall be allowed in respect of matters dealt with therein, in computing income referred to in section 28 (i)to (vi)****** (vii)subject to provisions of sub-section (2), amount of [any bad debt or part thereof which is written off as irrecoverable in accounts of assessee for previous year]: (2) In making any deduction for bad debt or part thereof, following provisions shall apply (1)no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing income of assessee of previous year in which amount of such debt or part thereof is written off or of earlier previous year, or represents money lent in ordinary course of business of banking or money-lending which is carried on by assessee." From perusal of section 36(2) of Act it can be seen that bad debt or part thereof can be allowed as deduction which has been offered for taxation in any of years if such debt represents money lent in ordinary course of business of money-lending carried on by assessee. In present case assessee has claimed bad debts on account of money lent during financial years 1992-93 to 1998-99 and on these advances assessee- company has earned income by way of interest and same have been declared in returns of income of respective assessment years for taxation purpose. 9. Whether assessee s business is of money-lending or not? First of all we have to go through Memorandum of Association of assessee- company and relevant Clauses 9 and 18 to Objects incidental and ancillary to attainment of Main Objects are to carry on business of investment companies and to lend, invest or otherwise employ or deal with money belonging to or entrusted to Company as provided and relevant Clauses are reproduced in para-5 at page-10 of this order hereinabove. Even Resolution was passed in meeting of Board of Directors of Company held on 20-2-1996 whereby assessee-company has resolved to carry on business of financing and investment including other financial activities and relevant Resolution is reproduced in para-5 at page-9 of this order hereinabove. These facts were disclosed to Assessing Officer at time of assessment and vide letter dated 17-12-2004 assessee-company to Assessing Officer has written that advances given to Rajbal Finance (P.) Ltd., was for purpose of business of giving loans and assessee has also earned income on these loans given to said company from time to time. relevant context of letter is reproduced in para-5 at page-8 of this order hereinabove. 10. In view of these facts, whether Assessing Officer s order is erroneous or prejudicial to interest of revenue particularly when he has discussed all these facts and after considering all these facts and documents, he has allowed claim of assessee. Assessing Officer has taken one view which is possible view, whereas CIT has taken view that Assessing Officer has failed to consider provisions of section 36(1)(vii) and section 36(2) of Act and also failed to comply with provisions of Companies Act, i.e., sections 16,17, 17A, 18 and 19. On other hand, after going through assessment order it is seen that Assessing Officer has considered Board s Resolution and Memorandum of Association authorizing assessee-company in Objects Incidental and Ancillary to attainment of Main Objects are very much available prior to advancing of loans by company and in this situation whether CIT can direct investigation without finding order to be erroneous one. We feel that CIT has no jurisdiction to set-aside assessment order merely to conduct another inquiry to reach same result which was arrived at earlier and if any fresh inquiry is conducted, it will be empty formality as by going through motion of making further inquiry and reaching same conclusion, no useful purpose would be achieved. Though it is expected of CIT to record his final conclusion in order passed in revision but he must at least indicate in his order, how order of Assessing Officer is erroneous and prejudicial to interest of revenue. In present case, facts are very clear and even before CIT during revision proceedings assessee-company has filed complete details which were available to Assessing Officer at time of framing of assessment. Even from perusal of order of CIT it comes to our notice that finding in that order is perverse to extent that assessee has not declared any income on loans given to Rajbal Finance (P.) Ltd., whereas facts narrate different story as assessee has filed complete details which shows that assessee has declared interest income in respective assessment years year-wise and details are reproduced in para-5 at page-9 of this order hereinabove. assessee- company has earned interest income to extent of Rs. 3,87,83,991 for various assessment years. Assessing Officer has allowed deduction after examining claim of assessee along with relevant provisions of t h e Act and conditions laid down under section 36(2) read with section 36(1)(vii) and assessee has complied with all conditions and specific findings in this regard were given in assessment order passed under section 143(3) read with section 147 of Act. 11. Coming to merit of case, we find that there is no default committed by assessee-company under Companies Act. assessee has carried on business of finance, which is duly covered by Memorandum of Association. No change under Memorandum of Association is required if company carries on ancillary and other objects. Memorandum of Association lays down various objects for which company is incorporated. Which of t h e objects out of various objects laid down in Memorandum of Association should be carried out is prerogative of Board of Directors. When company wants to carry on new business as stipulated in Memorandum of Association, no question of any alteration in Memorandum of Association arises. 12. Clause 17 on page 4 of Memorandum of Association authorizes company to carry on business of financiers which is given hereunder: "17. To lend money and other property, to guarantee performance of contracts and obligations of all kinds, to act as agents in management, sale and purchase and generally to transact business as capitalists and financiers." [Emphasis Supplied] It can be clearly seen from above clause that business of financing has been included in Memorandum of Association of company and there is no separate approval of any kind required as per said clause. Neither does Companies Act state anywhere that any separate approval is required to carry out any business, which is already included in Memorandum of Association of company. It will also not require any alteration in Memorandum of Association of company. learned counsel of assessee has referred to case laws of Hon ble Apex Court in case of Essen (P.) Ltd. v. CIT [1967] 65 ITR 625, wherein facts are that appellant, which carried on business as managing agent of several concerns, pursuant to Agreement with one of companies managed by it, advanced Large sums of moneys amounting to Rs. 3,40,956 to managed-company from time to time on current account. It also guaranteed along with director of managed-company loan of Rs. 2 lakhs obtained from bank. managed company failed in its business and upon bank pressing for payment, appellant, in accordance with its guarantee, paid bank Rs. 81,593 and out of goods of managed-company released by bank it realized Rs. 44,905. Even thereafter managed-company did not improve and there was no prospect of receiving, any moneys from it. appellant wrote off sum of Rs. 4,03,203 in its books and claimed allowance of that sum as bad debt. Tribunal found that advances to managed-company and agreement guaranteeing loan to managed- company were in pursuance of its objects and were made in course of its business and allowed claim. On reference of question whether debt was incurred in course of its business so as to make its loss deductible under section 10(2)(xi) of Indian Income-tax Act, 1922, High Court held that appellant acquired managing agency on condition of giving loans and making advances and loss arising out of such advances was only capital loss. On appeal to Supreme Court, Hon ble Apex Court, reversing decision of High Court, held that there was proper material before Appellate Tribunal in support of its finding that debt was incurred in course of its business so as to make it deductible under section 10(2)(xi) and that High Court exceeded its jurisdiction in traversing into findings of fact reached by Appellate Tribunal. Similarly, learned counsel of assessee referred to case law in case of CIT v. City Motor Service Ltd. [1966] 61 ITR 418, wherein Hon ble Madras High Court has observed that in order that debt may be allowable as bad debt under section 10(2)( xi) of Income-tax Act, 1922, it is not sufficient that debt was advanced in course of business. debt should further be of revenue nature, i.e., it should be such that, if it was recovered, it would have gone to swell profits. assessee-firm had advanced certain loans to limited company. loans were held in previous assessments to have been made in course of business and interest thereon was assessed to income-tax. amount of Rs. 56,300 was found due to assessee on 1-4-1956, and as company was not able to pay, sum of Rs. 55,040, which remained irrecoverable, was written off by assessee on 31-3-1957, and assessee claimed it as bad debt in assessment year 1957-58. department contended that even assuming that loans were advanced in course of business, nature of debt was not such that it would have gone to swell profits of assessee, if recovered and, therefore, it was not allowable under section 10(2)(xi). Hon ble High Court has held that, on facts and in circumstances of case, debt of Rs. 55,040 was allowable deduction under section 10(2)(xi). Similarly, learned counsel of assessee referred to case law in case of CIT v. Girish Bhagwatprasad [2002] 256 ITR 772 (Guj.). In this case facts are that assessee had written off amount of Rs. 4,36,307 on account of its/having become bad debt. Assessing Officer held that assessee could I not prove that debt had become bad and that assessee did not try to recover amount and further that mere delay in recovery did not convert debt into bad debt. On appeal, Commissioner of Income-tax (Appeals) found that amended provisions of section 36(1)(vii) of Income- tax Act, 1961, were applicable under which assessee was not required to establish that debt had become bad in previous year and mere writing off of amount as bad debt was sufficient. Even on merits, first appellate authority found that there was no chance for assessee to recover amount and hence, debt really became bad. Tribunal also upheld contention of assessee on basis of provisions of section 36(1)(vii) of Act which came into force from 1-4-1989, and upheld findings of first appellate authority. On application filed under section 256(2) of Act for directing Tribunal to refer question of law, Hon ble Jurisdictional High Court has held, that, under provisions of section 36(1)(vii) of Act, deduction had to be allowed in computing income referred to in section 28 of Act of amount of any bad debt or part thereof which is written off as irrecoverable in accounts of assessee for previous year subject to provisions of sub-section (2). Prior to amendment from 1-4-1989, allowance under this clause was confined to debts and loans which had become irrecoverable in accounting year. Thus, under provisions of section 36(1)(vii) as in force from 1-4-1989, all that assessee had to show was that bad debt was written off as irrecoverable. genuineness of such claim made by assessee was not in doubt. Therefore, no question of law arose for reference. 13. provisions of section 16 of Companies Act deal with alteration of clauses in Memorandum of Association. Sections 17 & 17A of Companies Act deal with procedure for alteration of Memorandum of Association. Section 18 of Companies Act deals with alteration relating to registered office of company. Section 19 of Companies Act states that no alteration under section 17 can be carried out until it is duly registered with Registrar of Companies. Therefore, provisions of sections 16, 17, 17A, 18 and 19 of Companies Act were not applicable in case of assessee. CIT has incorrectly applied aforesaid provisions of Companies Act to case of assessee for revising assessment order. 14. Even if any irregularity or illegality has been committed under Companies Act (although no such default was committed by assessee), it will not affect chargeability and computation of income under Income-tax Act. income has to be computed even from such activities under head "Income from business" and all provisions relating to deduction of expenditure as applicable for computing income under head "business" will be duly applicable in case of assessee. Thus, on basis of this point it cannot be said that there was error in assessment order passed by Assessing Officer. Even CIT has not specifically pointed out what particular default has been committed by assessee under Companies Act and how far it will apply to computation of income under Income-tax Act. Even it has not been mentioned how it will make assessment order to be erroneous one. 15. ground on which CIT held order to be erroneous is that Assessing Officer has wrongly allowed bad debts to assessee in order passed under section 143(3) read with section 147. assessee had claimed deduction on account of bad debts of amount of Rs. 34.90 crores in return of income filed for assessment year 1999-2000. During course of re- assessment proceedings, assessee explained that said sums were advanced by them to various concerns and advance given to M/s. Rajbal Finance (P.) Ltd., was written off as same had become irrecoverable. As per provisions of section 36(2) reproduced at page-6 of this order hereinabove, it can be seen that even money lent in ordinary course of business of banking or money-lending carried on by assessee, if irrecoverable are to be allowed as deduction for bad debts. 16. Since assessee-company had been lending money to various concerns from time of its incorporation, it can be clearly seen that business of money-lending was business carried on by assessee in its ordinary course of business, even though it may not have been main business of company. main business of company as can be seen from its Memorandum of Association was that of Technical and Management Consultancy Services but then there is no prohibition for company not to carry out any other related or ancillary business along with its main business. income which was being earned by assessee company out of monies so advanced was being shown as business income and being taxed accordingly from year to year. Even loans advanced from time to time have been shown regularly in its books. From audited accounts of assessee company, it is clearly seen that company s stock-in-trade is shares and income earned by assessee is mainly from trading in shares and hence company is investment company. For this purpose of its business, company has taken huge loans, both secured and unsecured. Correspondingly, company has also advanced huge amount of loans to various parties. There can be no denying of fact that company has been engaged in business of investment and financing in its ordinary course of business are interrelated and hence incidental to attainment of main objects of company s formation. In view of these facts, we are of considered opinion that on merits bad debts are allowable and Assessing Officer has rightly allowed bad debts while framing assessment under section 143(3) read with section 147 of Act. Accordingly, order passed by Assessing Officer is neither erroneous nor prejudicial to interests of revenue. Even on jurisdictional issue, Assessing Officer while framing assessment has gone into issue of allowance of bad debts and assessee has furnished complete details of bad debts written off, justification for writing off and Assessing Officer after satisfying provisions of section 36(1)(vii) and 36(2) allowed claim of assessee. Assessing Officer has taken view, which is one of possible views. If two views are possible, then order cannot be said to be erroneous or in any eventuality prejudicial to interests of revenue. Hon ble Apex Court in case of Malabar Industrial Co. Ltd. (supra) has very categorically held that CIT has to be satisfied of twin conditions, namely, (i) order of Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to interests of revenue. Further, Hon ble Apex Court in recent judgment in case of Max India Ltd. (supra) has held that wherein it is not in dispute when revision order was passed there were two views on word "profit" in that section and problem with section 80HHC is that it has been amended eleven times. Different views existed on day when CIT passed revision order. When two views are possible, issue has become so complicated and on two views possible, provisions of section 263 cannot be applied. In present case, CIT has pointed out that order passed by Assessing Officer is erroneous but on finding of fact it is seen that bad debts are allowable and order of Assessing Officer is not erroneous order. CIT s finding is perverse and no error is inferred from order of Assessing Officer and if order is not erroneous, then it cannot be prejudicial to interests of revenue. In view of these facts and circumstances of case, we fairly feel that even on jurisdictional issue, revision order passed by CIT under section 263 has no legs to stand. Accordingly, revision order passed by CIT under section 263 is quashed. 17. As facts are identical in assessment year 2000-2001, applying same principles, we quash revision order passed by CIT under section 263 for this year also. 18. In result, both appeals filed by assessee are allowed. *** MATRIX LOGISTICS (P) LTD. v. COMMISSIONER OF INCOME TAX