HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 114 / 2015 Commissioner of Income Tax-I, New Central Revenue Building , Statue Circle Jaipur Raj Appellant Versus M/s Green Triveni Developer, 309-310, City Pearl, Opp. Hotel Gangaur, M.I. Road, Jaipur Respondent Connected With D.B. Income Tax Appeal No. 256 / 2016 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) Appellant Versus M/s Green Triveni Developer, 309-310, City Pearl, Opp. Hotel Gangaur, M.I. Road, Jaipur Respondent For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Siddharth Ranka with Mr. Mujjfar Iqbal HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 24/10/2017 1. By way of these appeals, appellants have challenged judgment and order of Tribunal whereby Tribunal has allowed appeals preferred by assessee. 2. This Court while admitting ITA No.114/2015 on 30.09.2016 framed following substantial question of law: Whether in facts and circumstances of (2 of 23) [ ITA-114/2015] case and in law Tribunal was justified in setting aside order passed by CIT and quashing finding that assessment order is erroneous in so far as prejudicial to interest of revenue and thereby deleting addition of Rs.1,46,08,190/- made by Assessing Officer by disallowing provision for development expenses made by assessee, ignoring provision of Section 37(1) of Act and wrongly holding same to ascertained liability? 3. This Court while admitting ITA No.256/2016 on 22.03.2017 framed following substantial question of law: Whether Tribunal as well as CIT(A) were justified in quashing assessment order and thereby deleting disallowance of development expenses of Rs.1,46,08,190/- without any application of mind by merely relying upon earlier order of Tribunal dated 24.02.2015, ignoring that said order is under challenge before Hon ble High Court? 4. Counsel for appellant contended that Tribunal has seriously committed error. However, counsel for respondent has relied upon observations made by Tribunal, wherein it has been observed as under:- 2.6 We have heard rival contentions and perused material available on record. first finding of ld. CIT is to effect that assessment order has been passed in casual manner and without application of mind. In our consideration with above correspondence, evidence and discussions during course of assessment proceedings do not substantiate these adverse observations of ld. CIT. Consequently we are unable to agree that assessment order is erroneous or prejudicial to interest of revenue on this score. 2.7 Apropos allowability of JDA development charges as business expenditure, ld. CIT has no objection on assessee's following mercantile (3 of 23) [ ITA-114/2015] system of accounting in that eventuality even accrued liabilities are to be allowed. Assessee has demonstrated that per square yard working of JDA expenses was provided to ld. AO during assessment proceedings which is part of record. Once liability is accrued as per JDA circulars and AO allows claim based on working provided by assessee; it demonstratively means that AO allowed claim after due application of mind. Ld. CIT has not even disputed that liability is allowable as clearance has been give about liability qua sale proceeds offered. It has been lost sight of that assessee follows mercantile method, liability is statutory and working of quantum is provided. With all this available on record we hold that assessment order can neither be called as erroneous or prejudicial to interest of revenue. Our views are fortified by catena of judgments cited above, consequently 263 order is quashed and assessee's grounds are allowed. and decision of this Court passed in Income Tax Appeal No.147/2014, CIT v. M/s Shree Salasar Overseas (P) Ltd., passed on 29.04.2016, wherein it has been observed as under: 7. We have already taken into consideration salient features of business being carried on by assessee being coloniser/builder, developing various colonies, developing lands, cutting plots and selling thereof, and have also named colonies which have been developed by assessee. It is admitted fact on perusal of orders that assessee is not charging anything over and above towards development of internal roads electrification, sewer lines or other similar expenses for developing of land from ultimate buyers of plots. Equally important fact is that plot owner would purchase land only when it is satisfied that plot in question would have all basic facilities of internal development not only of plot but also of colony which is being developed by coloniser (assessee). Both (4 of 23) [ ITA-114/2015] Appellate Authorities have taken into consideration scheme of JDA for private townships wherein it has been expressly stated that coloniser cannot charge separate charges from buyers of plots in addition to cost of land for internal development work to be carried out by it. Though JDA carries out external development work, such as providing Sector Road for colony etc. but at expense of coloniser. Now it is option of coloniser to carry out development work by itself or through JDA. In case coloniser opts to carry out internal development work in colony through JDA, it has to pay amount to JDA at predetermined rate prescribed by JDA. However, if coloniser opts to carry out internal development work of colony by itself, then work has to be carried out under supervision of JDA and JDA monitors quality control of work. As per norms of JDA, if coloniser opts to carry out internal development works by itself, then JDA takes 12.5% of total plots as security against internal development work of colony to be carried out by coloniser. JDA releases there 12.5% plots only after completion of entire internal development by coloniser in accordance with quality control being specified by JDA. In case coloniser does not do work of internal development, JDA is free to sell these 12.5% plots in open market and do work of internal development of colony from sale proceeds of these plots for benefit of plot owners. It is only when JDA is satisfied about infrastructural development, Patta is issued and unless Patta is issued, plot may not be salable even, as Patta in case of immovable asset in most vital and important for having ownership of immovable asset. 8. Admittedly, assessee is following mercantile system of accounting and it is recognising same on accrual basis as and (5 of 23) [ ITA-114/2015] when possession of plot is passed/given. sale of plot is subject to liability of development work to be carried out in colony in future. This liability accrues as soon as sale of plot is made. assessee, admittedly made provision for development of land for plots sold during years under reference and actual expenses on development work incurred in colony accounted for by reversing provision made in respect of plots sold by it. 9. Appellate Authority in instant case have taken into consideration directives of JDA to develop colonies by various works which we have already referred to hereinbefore and naturally prospective buyers of plot gets attracted moment developer/builder specifies that land in question would be provided with basic infrastructure, such as internal roads, waterlines, sewer lines, electrification, boundary walls etc. so that once plot holder, wants to construct house, then for these things one need not look to other agencies. Once sale price has been received and accounted for, expenses which are obligatory and int eh nature of committed liability, ordinarily has to be accounted for. development expenses as found by Appellate Authorities, in our view as well are ascertained committed legal liability. and following decisions, which reads as under: 1. CIT v. Max India Ltd. (2007) 295 ITR 282 (SC), wherein it has been observed as under: 2. At this stage we may clarify that under paragraph 10 of judgment in case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 this Court has taken view that phrase "prejudicial to interests 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 interests (6 of 23) [ ITA-114/2015] 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 interests of revenue , unless view taken by Income Tax Officer is unsustainable in law. 2. CIT v. Rajiv Arora (DBITA 283/2010 dated 28.08.2017 Rajasthan High Court), wherein it has been observed as udner: 11.1 Before proceeding with matter, we may record that in view of order passed by AO and CIT(A) and taking into account powers which are conferred under Section 263, in view of law discussed hereinabove, we are of considered opinion that when assessee has filed reply dated 31.08.2009 and when he was specifically contended that in assessment proceedings, he has filed different reply than what has been referred by assessee in its reply before CIT(A) on different dates which has not been considered by CIT(A), even explanations which are given of all six grounds are not considered, therefore rejection of contention of assessee and then without consideration of remaining questions remanding matter back and passing order Section 263 requires to be considered and Tribunal has not committed any error in setting aside order of CIT u/s 263. 3. CIT v. Deepak Real Estate Developers (India) Pvt. Ltd. (DBITA 581/2011 dated 03.03.2014 Rajasthan High Court), wherein it has been observed as under:- 4. Commissioner of Income-tax, Kota (for short, hereafter referred to as "the CIT"), however, in exercise of his power under section 263 of Act issued notice to respondent-assessee being of opinion that assessment of Assessing Officer was erroneous and was further prejudicial to interests of Revenue. respondent-assessee entered appearance and submitted its detailed reply to queries, set out in show-cause notice. learned Commissioner of Income-tax, thereafter, by his order dated January 7, 2010, interfered with assessment of Assessing Officer and directed him (Assessing Officer) to verify details/documents, as mentioned therein and to decide issues and (7 of 23) [ ITA-114/2015] pass speaking order as per law, after affording opportunity of hearing. While arriving at this conclusion, learned Commissioner of Income-tax, however, held that sale transactions pertaining to 3,39,496 Zyden Gentec equity shares and effected on April 20, 2005, April 28, 2005, May 6, 2005, May 12, 2005, and September 8, 2005, could not be construed to be disputed as those were supported by documentary evidence and that Assessing Officer was justified in taking view that those shares of Overseas Capital Ltd., as appearing in sale bill, and those of Zyden Gentec Ltd. were same. It was, however, of view that Assessing Officer, having drawn that conclusion, ought to have, before accepting said transaction as long-term capital gain, examined whether respondent-assessee was holding same for period of more than one year, so as to claim exemption on that count. Commissioner of Income-tax, however, acknowledged that learned representative of respondent- assessee had brought to his notice fact that complete details of long-term gain on sale of shares, had been filed along with computation of income and was available with Assessing Officer during assessment proceedings and that materials at his disposal did contain date of purchase of said shares. That period of holding of shares involved was more than one year and that those being held as investment and STT being paid while selling same justified claim for exemption under section 10(38) of Act was mentioned. Commissioner of Income-tax accepted as well sale of 3,39,496 shares on aforementioned dates through its broker Inventure Growth and Securities Ltd. under aegis of Bombay Stock Exchange for total consideration of Rs. 3,71,81,627.01. He held as well that Assessing Officer was correct to conclude that shareholding of 2,18,000 shares out therefrom, was for period of more than one year, for which respondent-assessee had been validly granted exemption from tax under section 10(38) of Act. Vis-a-vis balance shares, i.e., 1,21,496 (3,39,496 - 2,18,000), Commissioner of Income- tax noticed stand of respondent-assessee that same were in physical form. Referring to supporting documents produced on behalf of respondent-assessee, learned Commissioner of Income-tax observed that same had not been filed during course of assessment proceedings (8 of 23) [ ITA-114/2015] and thus, were not verified and commented upon by Assessing Officer. It held view that proper verification thereof was necessary by Assessing Officer to ensure that 1,43,000 shares of Overseas Capital Ltd., which were received and delivered in physical form to director of respondent- assessee, were transferred to its demat account, so as to ensure that these were held by it (respondent- assessee) in physical form for period of more than one year to entitle it to benefit of exemption under section 10(38) of Act. With regard to amount of loan of Rs. 43,28,000, taken by respondent-assessee from one Smt. Usha Gupta, learned Commissioner of Income-tax held that documents and records produced before him in connection therewith, had not been laid before Assessing Officer earlier. He, thus, concluded that in view of lack of enquiry and non-application of mind on part of Assessing Officer, assessment was erroneous and prejudicial to interests of Revenue. Noticeably, learned Commissioner of Income-tax did not record any categorical finding on any aspect of assessment made, vide order dated September 25, 2008, that related conclusion of Assessing Officer was either factually incorrect or unsustainable in law, having regard to complete materials on record. 5. Be that as it may, being aggrieved by above determination, respondent-assessee preferred appeal before Income-tax Appellate Tribunal, Jaipur Bench "A", Jaipur (for short, hereafter referred to as "the Tribunal"), which by its rendering dated March 25, 2011, interfered with above referred decision of learned Commissioner of Income-tax. As text of this order, impugned in present appeal, would reveal learned Tribunal did notice relevant facts in extenso and observed that only dispute was with regard to 1,43,000 shares received in physical form and eventually shown in demat account of respondent-assessee. Referring to documents/records produced before learned Commissioner of Income-tax, learned Tribunal recorded that he (Commissioner) had not formed any opinion that these shares had not been held by respondent-assessee for more than one year. learned Tribunal expressed view that in face of materials before him, learned Commissioner of Income-tax could not have formed (9 of 23) [ ITA-114/2015] any opinion that assessment order was erroneous. It recalled findings of Assessing Officer, as adverted to hereinabove and concluded that learned Commissioner of Income-tax not having come to conclusion that assessment order was erroneous and no reasons having been recorded to demonstrate that same was prejudicial to interests of Revenue, he was not justified to refer matter back to Assessing Officer and that too, without examining materials produced before him on merits. 8. Upon hearing learned counsel for parties and on consideration of materials on record, we are inclined to sustain plea taken on behalf of respondent-assessee. salient facts bearing on debate have been outlined hereinabove. To reiterate, bare perusal of order dated September 25, 2008, of Income-tax Officer (OSD), Range-1, Kota, would testify that Assessing Officer had consciously examined all relevant records in accepting return submitted by respondent- assessee. Noticeably, learned Commissioner of Income-tax, in spite of his incisive analysis of factual details, did not find fault with any of findings of Assessing Officer, culminating in ultimate conclusion that return of respondent-assessee was acceptable as whole. text of decision of learned Commissioner of Income-tax authenticates that respondent- assessee had furnished to him all relevant records and documents in support of its return accepted by Assessing Officer. learned Commissioner of Income-tax did neither reject said documents/records to be irrelevant, nor lacking in their probative worth. It simply remanded matter to Assessing Officer observing that these ought to have been laid before him and examined at time of assessment. 9.It is no longer res integra that revisional jurisdiction available to Commissioner under section 263 of Act is essentially circumscribed by determinant that order of Assessing Officer is erroneous so much so that it is prejudicial to interests of Revenue. This statutory enjoinment carves out extremely constricted ambit of such discretionary jurisdiction. word "considers" applied in statutory provision involved, signifies (10 of 23) [ ITA-114/2015] genuine satisfaction of that authority that order of Assessing Officer is erroneous and that interests of Revenue is prejudicing thereby. Any exercise of revisional jurisdiction, bereft of such satisfaction and/or finding that order of Assessing Officer is erroneous and that it is prejudicial to interests of Revenue and that too, based on tangible materials on record, is impermissible rendering resultant order void. 10. Judged on above touchstone, we are of unhesitant opinion, having regard to materials on record, that no interference with impugned order of learned Tribunal is warranted, in facts and circumstances of case. No substantial question of law, as contemplated by section 260A of Act, exists to be examined. 4. ITO v. D.G. Housing Projects Ltd. 2012 (343) ITR 329 (Delhi), wherein it has been observed as under:- 16. Thus, in cases of wrong opinion or finding on merits, CIT has to come to conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required and necessary, before order under Section 263 is passed. In such cases, order of Assessing Officer will be erroneous because order passed is not sustainable in law and said finding must be recorded. CIT cannot remand matter to Assessing Officer to decide whether findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again CIT must give and record finding that order/inquiry made is erroneous. This can happen if enquiry and verification is conducted by CIT and he is able to establish and show error or mistake made by Assessing Officer, making order unsustainable in Law. In some cases possibly though rarely, CIT can also show and establish that facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but Assessing Officer had erroneously not undertaken same. However, said finding must be clear, unambiguous and not debatable. matter cannot be remitted for fresh decision to Assessing Officer to conduct further enquiries without finding that order is erroneous. Finding that order is erroneous is condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of Act. In such matters, to remand matter/issue to (11 of 23) [ ITA-114/2015] Assessing Officer would imply and mean CIT has not examined and decided whether or not order is erroneous but has directed Assessing Officer to decide aspect/question. 5. CIT v. Sunbeam Auto (2011) 332 ITR 167 (Delhi), wherein it has been observed as under:- 15. Even Commissioner conceded position that AO made inquiries, elicited replies and thereafter passed assessment order. grievance of Commissioner was that AO should have made further inquiries rather than accepting explanation. Therefore, it cannot be said that it is case of 'lack of inquiry'. 16. Having put records straight on this aspect, let us proceed further. Is it case where Commissioner has concluded that opinion of AO was clearly erroneous and not warranted on facts before him and, viz., expenditure incurred was not revenue expenditure but should have been treated as capital expenditure? Obviously not. Even Commissioner in his order, passed under Section 263 of Act, is not clear as to whether expenditure can be treated as capital expenditure or it is revenue in nature. No doubt, in certain cases, it may not be possible to come to definite finding and therefore, it is not necessary that in all cases Commissioner is bound to express final view, as held by this Court in Geevee Enterprise [supra]. But, least that was expected was to record finding that order sought to be revised was erroneous and prejudicial to interest of revenue. [see Sashayee Paper(supra)]. No basis for this is disclosed. In sum and substance, accounting practice of assessee is questioned. However, that basis of order vanishes in thin air when we find that this very accounting practice, followed for number of years, had approval of income tax authorities. Interestingly, even for future assessment years, same very accounting practice is accepted. 20. Likewise, whether Commissioner should have recorded definite finding or not, may not be very relevant factor in present case where on facts of this case we have found that opinion of AO in treating expenditure as revenue expenditure was plausible and thus there was no material before CIT to vary that opinion and ask for fresh inquiry. (12 of 23) [ ITA-114/2015] 6. CIT v. Vikas Polymers (2012) 341 ITR 537 (Delhi), wherein it has been observed as under:- 9. Before we undertake exercise of answering reference, it is deemed expedient to reiterate governing principles laid down by Courts with regard to exercise of power by Commissioner under provisions of Section 263 of Act. power of suo moto revision exercisable by Commissioner is undoubtedly supervisory in nature. opening words of Section 263 empowers Commissioner to call for and examine record of any proceedings under Act. bare reading of Section 263 also makes it clear that Commissioner 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 interest of revenue. If one of them is absent - if order of Income Tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but it is prejudicial to revenue - recourse cannot be had to Section 263(1) of Act See Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC). 13. It is also trite that there is fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that Commissioner is empowered to exercise his revisional powers by calling for and examining records of any proceedings under Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed:- Commissioner cannot initiate proceedings with view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against well-accepted policy of law that there must be point of finality in all legal proceedings, that stale issues should not be reactivated beyond particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity see Parashuram Pottery Works Co. Ltd. v. ITO (1977) 106 ITR 1 (SC). It was further observed as under:- From aforesaid definitions as it is clear that order cannot be termed as erroneous unless it is not in accordance with law. If Income Tax Officer acting in accordance with law makes certain assessment, same cannot be branded as erroneous by Commissioner simply because, (13 of 23) [ ITA-114/2015] according to him, order should have been written more elaborately. This section does not visualize case of substitution of judgment of Commissioner for that of Income Tax Officer, who passed order unless decision is held to be erroneous. Cases may be visualized where Income Tax Officer while making assessment examines accounts, makes enquiries, applies his mind to facts and circumstances of case and determines income either by accepting accounts or by making some estimate himself. Commissioner, on perusal of records, may be of opinion that estimate made by officer concerned was on lower side and left to commissioner he would have estimated income at figure higher than one determined by Income Tax Officer. That would not vest Commissioner with power to re-examine accounts and determine income himself at higher figure. It is because Income Tax Officer has exercised quasi-judicial power vested in him in accordance with law and arrived at conclusion and such conclusion cannot be termed to be erroneous simply because Commissioner does not feel satisfied with conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by application of relevant statute on incorrect or incomplete interpretation lesser tax than what was just has been imposed. We may now examine facts of present case in light of powers of Commissioner set out above. Income Tax Officer in this case had made enquiries in regard to nature of expenditure incurred by assessee. assessee had given detailed explanation in that regard by letter in writing. All these are part of record of case. Evidently, claim was allowed by Income Tax Officer on being satisfied with explanation of assessee. Such decision of Income Tax Officer cannot be held to be "erroneous" simply because in his order he did not make elaborate discussion in that regard. 15. Applying aforesaid law to facts of present case, we are of view that exercise of revisional power by Commissioner in instant case was uncalled for and unjustified. It was more in nature of roving and fishing enquiry. Commissioner has proceeded on assumption that no such information, as was furnished to him, was furnished at time of assessment. Commissioner has mentioned that Income Tax officer has not examined cash credits of partners or deposits of Chit Fund. Assuming this to be so (though there does not appear to be any justification for aforesaid observation), this may make order erroneous, but how it is prejudicial to interest of revenue has not been stated by Commissioner as he did not deal with explanation given by assessee in course of Section 263 proceedings. (14 of 23) [ ITA-114/2015] 7. DIT v. Jyoti Foundation (2013) 357 ITR 388 (Delhi), wherein it has been observed as under:- 4. Revisionary power under Section 263 of Act is conferred by Act on Commissioner/Director of Income Tax when order passed by lower authority is erroneous and prejudicial to interest of Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to interest of Revenue, but orders which are passed after inquiry/investigation on question/issue are not per se or normally treated as erroneous and prejudicial to interest of Revenue because revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In Income Tax Officer versus DG Housing Projects Limited, MANU/DE/0895/2012 : (2012) 343 ITR 329 (Del) it has been observed: 11. Assessing Officer is both investigator and adjudicator. If Assessing Officer as adjudicator decides question or aspect and makes wrong assessment which is unsustainable in law, it can be corrected by Commissioner in exercise of revisionary power. As investigator, it is incumbent upon Assessing Officer to investigate facts required to be examined and verified to compute taxable income. If Assessing Officer fails to conduct said investigation, he commits error and word 'erroneous' includes failure to make enquiry. In such cases, order becomes erroneous because enquiry or verification has not been made and not because wrong order has been passed on merits. 5. In present case, inquiries were certainly conducted by Assessing Officer. It is not case of no inquiry. order under Section 263 itself records that Director felt that inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in case of DG Housing Projects Limited (supra), inquiry should have been conducted by Commissioner or Director himself to record finding that assessment order was erroneous. He should not have set aside order and directed Assessing Officer to conduct said inquiry. (15 of 23) [ ITA-114/2015] 8. PCIT v. Delhi Airport Metro Express Pvt. Ltd. (ITA 705/2017 dated 05.09.2017) 10.For purposes of exercising jurisdiction under Section 263 of Act, conclusion that order of AO is erroneous and prejudicial to interests of Revenue has to be preceded by some minimal inquiry. In fact, if PCIT is of view that AO did not undertake any inquiry, it becomes incumbent on PCIT to conduct such inquiry. All that PCIT has done in impugned order is to refer to Circular of CBDT and conclude that in case of Assessee company, AO was duty bound to calculate and allow depreciation on BOT in conformity of CBDT Circular 9/2014 but AO failed to do so. Therefore, order of AO is erroneous insofar as prejudicial to interest of revenue . 11.In considered view of Court, this can hardly constitute reasons required to be given by PCIT to justify exercise of jurisdiction under Section 263 of Act. In context of present case if, as urged by Revenue, Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon PCIT to undertake inquiry as regards which of assets were purchased and installed by Assessee out of its own funds during AY in question and, which were those assets that were handed over to it by DMRC. That basic exercise of determining to what extent depreciation was claimed in excess has not been undertaken by PCIT. 5. Learned counsel for respondent has also relied upon following judgments which reads as under:- 1. CIT v. Reliance Communication Ltd. (2016) 76 Taxmann.com 226 (SC), wherein it has been observed as under:- Section 68, read with section 263, of Income- tax Act, 1961- Cash credits (FCCBs)- Assessee raised funds by way of FCCBs during year under (16 of 23) [ ITA-114/2015] consideration-Assessing Officer completed assessment accepting income declared by assessee- Commissioner noticed that no investigation was carried out by Assessing Officer to establish name and address, genuineness and creditworthiness of actual subscribers to FCCBs in terms of section 68 He thus passed revisional order setting aside assessment Tribunal noted that Assessing Officer had made detailed enquiries about aforesaid aspect and mere fact that he did not make any reference to said issue in assessment order, could not make said order erroneous and prejudicial to interest of revenues High Court by inpugned order held that finding recorded by Tribunal being finding of fact, no substantial question of law arose therefrom Whether Special Leave Petition filed against impugned order was to be dismissed Held, yes. 2. CIT v. Sunbeam Auto (2011) 332 ITR 167 (Delhi), wherein it has been observed as under:- 12. We have considered rival submissions of counsel on other side and have gone through records. first issue that arises for our consideration is about exercise of power by Commissioner of Income Tax under Section 263 of Income Tax Act. As noted above, submission of learned Counsel for Revenue was that while passing assessment order, AO did not consider this aspect specifically whether expenditure in question was revenue or capital expenditure. This argument predicates on assessment order, which apparently does not give any reasons while allowing entire expenditure as Revenue expenditure. However, that by itself would not be indicative of fact that AO had not applied his mind on issue. There are judgments galore laying down principle that AO in assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from record as to whether there was application of mind before allowing expenditure in question as revenue expenditure. Learned Counsel for assessee is right in his submission that one has to keep in mind distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to Commissioner to pass orders under Section 263 of Act, merely because he has (17 of 23) [ ITA-114/2015] different opinion in matter. It is only in cases of "lack of inquiry" that such course of action would be open. 3. CIT v. Nirmala Devi Choudia (DBITA 296/2013 dated 06.12.2016-Rajasthan High Court), wherein it has been observed as under:- Tribunal while considering case of Department in Para 2.11 has rightly held as under:- 2.11 We have heard rival contentions and perused materials available on record. We find from record that assessee had already filed return of income despite that she has been wrongly accused of not filing same; this subjected assessee to rigor of avoidable 148 proceedings. record and submissions filed during course of assessment proceedings did not in any manner indicate that proper enquiries and verification were not conducted. order of AO though short yet crisp and clear in arriving at proper findings reflecting reasonable discharge of assessment which cannot be held as erroneous. In our considered view, case laws cited by Id. AR in case of CIT vs. Sun Beam Auto Ltd. (Delhi), Malabar Industrial Co. Ltd. vs. CIT (SC) and CIT vs. Max India Ltd. (supra) support assessee s contentions. We are of view that 263 proceedings cannot be invoked where reasonable inquiries are conducted with application of mind; there is conspicuous difference between cases of lack of enquiry and perception about level of enquiry. In this case it emerges that Id. CIT carried different perception about manner of enquiry which ought to have been conducted by AO; however it is not sufficient to hold assessment order as erroneous and thereby prejudicial to interest of revenue. plethora of case laws cited by assessee do not support such type of exercise of power under Section 263 of Act. Hence 263 order holding AO s order as erroneous cannot be sustained merely because Id. CIT holds different plausible view about manner of inquiry. Consequently, we are unable to uphold impugned order under Section 263 of Act passed by Id. CIT which is quashed. Thus appeal of assessee is allowed. Tribunal has held that case under section 263 of Act is not made out and we are in complete agreement with view taken by Tribunal. Power of section 263 cannot be exercised for want of enquiry in particular manner. (18 of 23) [ ITA-114/2015] 4. CIT v. Fine Jewellery (India) Ltd. (DBITA 296/2016-dated 03.02.2013-Bombay HC), wherein it has been observed as under:- 8. We find that impugned order of Tribunal does record fact that specific queries were made during assessment proceedings with regard to details of expenditure claimed under head "miscellaneous expenses" aggregating to Rs. 2.94 crores. respondent-assessee had responded to same and on consideration of response of respondent-assessee, Assessing Officer held that of amount of Rs. 17.98 lakhs incurred on account of repairs and maintenance out of Rs. 2.94 crores is capital expenditure. This itself would be indication of application of mind by Assessing Officer while passing impugned order. fact that assessment order itself does not contain any discussion with regard to balance amount of expenditure of Rs. 1.76 crores, i.e., Rs. 2.94 crores less Rs. 17.98 lakhs claimed as revenue expenditure would not by itself indicate non-application of mind to this issue by Assessing Officer in view of specific queries made during assessment proceedings and respondent-assessee's response to it. In fact this court in case of Idea Cellular Ltd. v. Deputy CIT [2008] 301 ITR 407 (Bom) has held that if query is raised during assessment proceedings and responded to by assessee, mere fact that it is not dealt with in assessment order would not lead to conclusion that no mind had been applied to it. 5. CIT v. Anil Kumar Sharma (2011) 335 ITR 83 (Delhi), wherein it has been observed as under:- 5. Tribunal after examining facts of case observed that although it is not discernible from assessment order whether assessing officer had applied his mind or not, but it was prerogative of assessing officer to draft his order, and if he failed to record certain findings, assessee could not be penalized therefor. Tribunal further observed that what has to be ascertained is whether assessing officer had investigated issue and applied his mind to whole record. In this behalf it noted that assessing officer had asked assessee to submit purchase deed in respect of (19 of 23) [ ITA-114/2015] purchase of land at village Tughlakabad and that assessee in response thereto had supplied requisite details and submitted copy of High Courts decision in relation to award of compensation etc. Tribunal, therefore, came to conclusion that complete details were filed before assessing officer and that he applied his mind to relevant material and facts, although such application of mind is not discernible from assessment order. Tribunal held that CIT in proceedings under Section 263 also had all these details and material available before it, but had not been able to point out defects conclusively in said material, for arriving at conclusion that particular income had escaped assessment on account of non-application of mind by assessing officer. Tribunal, therefore, allowed appeal of assessee and quashed order of CIT passed under Section 263 of said Act. 7. In view of above discussion, it is apparent that Tribunal arrived at conclusive finding that, though assessment order does not patently indicate that issue in question had been considered by assessing officer, record showed that assessing officer had applied his mind. Once such application of mind is discernible from record, proceedings under Section 263 would fall into area of CIT having different opinion. We are of view that findings of facts arrived at by Tribunal do not warrant interference of this Court. That being position, present case would not be one of "lack of inquiry" and, even if inquiry was termed as inadequate, following decision in Sunbeam Auto Ltd. (supra), "that would not by itself give occasion to CIT to pass orders under Section 263 of said Act, merely because he has different opinion in matter." No substantial question of law arises for our consideration. Consequently, appeal is dismissed. 6. Moil Ltd. v. CIT (2017) 81 taxmann.com 420 (Bombay), wherein it has been observed as under:- 5. On perusal of orders passed by Authorities, it appears that before assessment order was passed, notice was served on assessee under Section 142 (1) of Act and 20 queries pertaining to different heads were made therein. ninth query in notice under Section 142 (1) of Act pertains to expenditure for (20 of 23) [ ITA-114/2015] Corporate Social Responsibility. By said query, assessee was directed to give detailed note of expenditure for Corporate Social Responsibility along with bifurcation of expenses under different heads. exhaustive reply was submitted by assessee to notice under Section 142 (1) of Act. In paragraph 8 of reply, assessee gave detailed note pertaining to expenditure for Corporate Social Responsibility under different heads that runs into several pages. heads under which expenses were made towards Corporate Social Responsibility were specifically mentioned as health, environment, sports, education etc. and for each of different heads, particulars were given in respect of every minor or major expenses. detailed note on expenditure on Corporate Social Responsibility claim was given in paragraph 8 which runs into more than five pages. It is not disputed that appellant - assessee is Government of India undertaking and Government has control over expenses of undertaking. It is pertinent to note that during previous assessment years, similar claims were made by assessee - Company and assessment orders allowing claims have attained finality. We have minutely perused assessment order. claims for deductions were made by assessee at least under 20 heads and queries were made in notice under Section 142 (1) of Act to assessee in respect of nearly all of them. We, however, find from assessment order that Assessing Officer has dealt with nearly nine claims of deductions. These claims have been specifically mentioned in assessment order and they have been discussed therein because Assessing Officer appears to have disallowed those claims either partially or totally. In respect of claim for Corporate Social Responsibility and some other claims that were allowed by Assessing Officer, Assessing Officer has not made specific reference in assessment order. It is apparent from assessment order that Assessing Officer has expressed in detail about claims that were disallowable. Where claims were allowable, as we find from reading of assessment order, Assessing Officer has not referred to those claims. Corporate Social Responsibility claim is one of them. It is apparent from notice under Section 142 (1) of Act that specific query in (21 of 23) [ ITA-114/2015] regard to claim pertaining to Corporate Social Responsibility was made and detailed note after giving bifurcation of expenses under different heads was sought. We have perused response in respect of this query which is exhaustive. We find that assessee has given details, as are sought under query No. 9 in notice under Section 142 (1) of Act. If that is so, judgments, reported in (2015) 372 ITR 303 (Bom.) and (2016) 138 DTR 81 (Bom.) and on which learned Counsel for assessee has placed great reliance would come into play. It is held in judgments referred to herein above by relying on judgment in case of Idea Cellular Ltd. (Supra) that if query is raised during assessment proceedings and query is responded to by assessee, mere fact that query is not dealt with in assessment order would not lead to conclusion that no mind has been applied to it. In case of Fine Jewellery (India) Ltd. (Supra) this Court found that from nature of expenditure as explained by assessee in that case Assessing Officer took possible view and therefore, it was not case where provisions of Section 263 of Act could have been resorted to. Considering explanation of assessee in this case, we are also of view that Assessing Officer had taken possible view. In case of Nirav Modi (Supra) this Court held that Tribunal was justified in that case in cancelling order under Section 263 of Act as assessee had responded to query made to it during assessment proceedings and merely because assessment order did not mention same, it would not lead to conclusion that Assessing Officer had not applied his mind to case. In instant case, we find that Assessing Officer has applied his mind to claims made by assessee and wherever claims were disallowable they have been discussed in that assessment order and there is no discussion or reference in respect of claims that were allowed. In view of law laid down in judgments in case of Fine Jewellery (India) Ltd. (Supra) and Nirav Modi (Supra) it would be necessary to hold that in circumstances of case, it cannot be said that merely because Assessing Officer had not specifically mentioned about claim in respect of Corporate Social Responsibility, Assessing Officer had passed (22 of 23) [ ITA-114/2015] assessment order without making any enquiry in respect of allowability of claim of Corporate Social Responsibility. In our view, provisions of Section 263 of Act could not have been invoked by Commissioner of Income Tax in circumstances of this case. Tribunal was not justified in holding that query under Section 142 (1) of Act was very general in nature and reply of assessee was also very general in nature. In our considered view, query pertaining to Corporate Social Responsibility was exhaustively answered and appellant - assessee had provided data pertaining to expenditure under each head of claim in respect of Corporate Social Responsibility, in detail. Tribunal was not justified in holding that reply/explanation of assessee was not elaborate enough to decide whether expenditure claim was admissible under provisions of Income Tax Act. Assessing Officer is not expected to raise more queries, if Assessing Officer is satisfied about admissibility of claim on basis of material and details supplied. In facts and circumstances of case, we answer question of law in negative and against revenue. 7. CIT v. Honda Siel Power Products Ltd. (2011) 33 ITR 547 (Delhi), wherein it has been observed as under:- 18. From aforesaid discussion, it is apparent that expression prejudicial to interest of revenue appearing in Section 263 has to be read in conjunction with expression 'erroneous' and that every loss of revenue as consequence of order of Assessing Officer cannot be treated as prejudicial to interest of revenue. In cases where Assessing Officer adopts one of courses permissible in law or where two views are possible and Income Tax Officer has taken one view, Commissioner of Income Tax cannot exercise his powers under Section 263 to differ with view of Assessing Officer even if there has been loss of revenue. Of course, if Assessing Officer takes view which is patently unsustainable in law, Commissioner of Income Tax can exercise his powers under (23 of 23) [ ITA-114/2015] Section 263 where loss of revenue results as consequence of view adopted by Assessing Officer. It is also clear that while passing order under Section 263, Commissioner of Income Tax has to examine not only assessment order, but entire record of profits. Since assessee has no control over way assessment order is drafted and since, generally, issues which are accepted by Assessing Officer do not find mention in assessment order and only those points are taken note of on which assessee's explanations are rejected and additions / disallowances are made, mere absence of discussion of provisions of Section 80IB(13) read with Section 80IA(9) would not mean that Assessing Officer had not applied his mind to said provisions. As pointed out in Kelvinator of India (supra), when regular assessment is made under Section 143(3), presumption can be raised that order has been passed upon application of mind. No doubt, this presumption is rebuttable, but there must be some material to indicate that Assessing Officer had not applied his mind. 6. In view of above, issues are required to be answered in favour of assessee and against department. 7. appeals are dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/23-24 Commissioner of Income-tax-I, Jaipur Raj v. Green Triveni Developer