INCOME TAX APPEAL No.-223 of 2013 A.F.R. Reserved on 02.08.2019 Delivered on 14.08.2019 Court No. - 35 Case :- INCOME TAX APPEAL No. - 223 of 2013 Appellant :- M/S Meerut Roller Flour Mills Pvt. Ltd Respondent :- Commissioner Of Income Tax And Another Counsel for Appellant :- Suyash Agarwal,Rakesh Ranjan Agrawal Counsel for Respondent :- C.S.C. Income Tax,Gaurav Mahajan Hon'ble Bharati Sapru,J. Hon'ble Rohit Ranjan Agarwal,J. (Per Hon'ble Rohit Ranjan Agarwal,J.) 1. This appeal under Section 260 of Income Tax Act, 1961 (hereinafter called as 'Act') has been filed assailing order passed by Income Tax Appellate Tribunal, Delhi Bench E New Delhi dated 02.04.2013 and Revisional order dated 09.02.2012, passed by Commissioner of Income Tax, Meerut, under Section 263 of Act. 2. appeal was admitted on 06.09.2013 on following questions of law:- I. Whether on facts and circumstances of case ITAT rightly held that Commissioner of Income Tax, Meerut has correctly assumed jurisdiction under Section 263, in revising assessment order dated 15.12.2009 passed under Section 143(3) of Act for A.Y. 2007-08? II. Whether ITAT is right in upholding order of CIT passed under Section 263 which has been passed without controverting appellant's explanation/submissions dated 15.10.2009, 05.11.2009 and 04.12.2009 before A.O. In compliance of his queries in relation to verification of loan creditors and trade creditors? 3. case relates to assessment year 2007-2008. [2] INCOME TAX APPEAL No. - 223 of 2013 assessee filed return of income on 31.10.2007 declaring income of Rs. 10,59,560/-. said return was processed under Section 143(1) of Act. Case of assessee was selected for scrutiny and notice under Section 143(2) of Act was issued by Assessing Officer on 26.09.2008, further notice under Section 142(1), dated 25.03.2009, along with questionnaire raising 28 queries was issued and served on assessee. assessee on 15.10.2009 filed his replies to queries raised in notice dated 25.03.2009. It appears that Assessing Officer further required assessee to furnish explanation, which was submitted by assessee in form of written submission on 05.11.2009. On 15.12.2009, order under Section 143(2) of Act was passed by Assessing Officer, accepting return of income of Rs.10,59,560/-. 4. Commissioner Income Tax, Meerut exercising power under Section 263 of Act on 27.10.2010 issued notice to assessee, detailed objection in form of written submission was submitted by assessee before him on 18.10.2011, stating that all the details and documentary evidence in regard to investment in share capital, unsecured loans, creditors and expenses was submitted before Assessing Officer by assessee in reply to 28 queries raised by Assessing Officer. 5. On 09.02.2012, Commissioner Income Tax, Meerut passed order, partly accepting objection of assessee as far as investment in share capital was concerned but, as regards unsecured loans and creditors were concerned, case of assessee was relegated back to [3] INCOME TAX APPEAL No. - 223 of 2013 Assessing Officer directing him to examine, call for requisite details, confirmations and examine them properly after affording assessee proper and reasonable opportunity to explain its case and verify details with help of documentary evidence. 6. order passed by Commissioner Income Tax, Meerut under Section 263 of Act was challenged by assessee before Income Tax Appellate Tribunal (hereinafter called 'ITAT'). ITAT dismissed appeal of assessee upholding order passed by Commissioner of Income Tax, Meerut. 7. Sri Suyash Agarwal, learned counsel appearing for assessee/ appellant submitted that Tribunal failed to consider that Commissioner Income Tax was not justified in invoking provisions of Section 263 of Income Tax Act, as order passed by Assessing Officer was neither erroneous nor prejudicial to interest of revenue. It was further contended that after case of appellant was selected for scrutiny, Assessing Officer had issued notice under Section 143(2) of Act, raising 28 queries which were in regard to investment in share capital, unsecured loans, creditors and expenses, which was replied by assessee, furnishing entire details along with documentary evidence. It was also submitted that details of all unsecured loans was furnished to Assessing Officer along with their PAN numbers and other details as required. 8. He further submitted that Commissioner Income Tax [4] INCOME TAX APPEAL No. - 223 of 2013 while exercising power under Section 263 as well as ITAT dismissing appeal had wrongly applied law laid down by Apex Court in case of Malabar Industrial Company vs. CIT (2000) 109 Taxman 66 (SC). 9. second limb of argument of counsel for assessee is that mere non-discussion and non-mentioning about reply to queries submitted by assessee cannot lead to assumption by CIT as well as ITAT that Assessing Officer has not applied his mind, he relied upon decision in case of CIT vs. Krishan Capbox Ltd. (2015) 372 ITR 310 (Allahabad). 10. It was further contended that queries raised during assessment proceedings and same not having been dealt in assessment order would not lead to conclusion that no enquiry was made and Assessing Officer has not applied his mind. Reliance has been placed on decision of CIT vs. Mahendra Kumar Bansal (2008) 297 ITR 99 (Allahabad). Another decision which has been relied on by counsel for assessee is in case of CIT vs. Goyal Private Family Specific Trust (1988) 171 ITR 698 (Allahabad). 11. Per contra, Sri Gaurav Mahajan, learned counsel appearing for Department submitted that assessment order dated 15.12.2009 is totally silent in respect of unsecured loans and creditors and Assessing Officer was bound to examine identity of creditors, creditworthiness of creditors and genuineness of transactions before any loan or cash [5] INCOME TAX APPEAL No. - 223 of 2013 credit is accepted. 12. He further contended that Commissioner of Income Tax had rightly exercised his power mandated, under Section 263 and, it was only after giving due opportunity of hearing to assessee that assessment order was set aside to certain extent with direction to Assessing Officer to verify details. Sri Mahajan lastly submitted that Tribunal, being last fact finding Authority, and it was after appreciating evidence and material on record, came to conclusion that matter required no interference in order passed under Section 263 of Act. He has relied upon decision in cases of CIT vs. Anand Kumar Jain (2015) 231 Taxman 534 (Allahabad), Malabar Industrial Company vs. CIT (2000) 109 Taxman 66 (SC), Swarup Vegetable Products vs. CIT (1991) 54 Taxman 175 (Allahabad) and CIT vs. Bhagwan Das (2005) 142 Taxman 1 (Allahabad). 13. We have heard counsel for parties and perused material on record. 14. As it is undisputed, that Assessing Officer after case was selected for scrutiny had issued notice under Section 143(2) of Act and also notice under Section 142(1) with 28 queries to assessee, which was replied by him along with documentary evidence, and Assessing Officer being satisfied passed order under Section 143(3) of Act on 15.12.2009. CIT while exercising power under Section 263 of Act, partially accepted reply submitted by assessee as regards investment in share capital holding [6] INCOME TAX APPEAL No. - 223 of 2013 that outstanding unsecured loans of six persons to be adjusted against share application money account, but as regards unsecured loans and creditors, it directed Assessing Officer to examine, call for requisite details, confirmations and examine them properly and relegated matter back to him. While passing said order CIT relied upon decision of Apex Court in case of Malabar Industrial Company Ltd. (supra). Paragraph Nos. 6, 7, 8, 9 and 10 of said judgment are extracted hereinasunder:- 6. bare reading of this provision makes it clear that pre-requisite to exercise of jurisdiction by Commissioner suo moto under it, is that order of ITO is erroneous insofar as it is prejudicial to interests of revenue. Commissioner has to be satisfied with twin conditions, namely, (i). order of Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to interests of revenue. If one of them is absent - if order of ITO is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue- recourse cannot be had to Section 263(1). 7. There can be no doubt that provision cannot be invoked to correct each and every type of mistake or error committed by Assessing Officer; 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. In same category fall orders passed without applying principles of natural justice or without application of mind. phrase 'prejudicial to interests of revenue' is not expression of art and is not defined in Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [1957] 31 ITR 872, High Court of Karnataka in CIT v. T. Narayana Pai [1975] 98 ITR 422, High Court of Bombay [7] INCOME TAX APPEAL No. - 223 of 2013 in CIT v. Gabriel India Ltd. [1993] 203 ITR 208 and High Court of Gujarat in CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81/ 79 Taxman 184 treated loss of tax as prejudicial to interests of revenue. 8. Mr. Abraham relied on judgment of Division Bench of High Court of Madras in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 interpreting 'prejudicial to interests of revenue'. High Court held, In this context, it must be regarded as involving conception of acts or orders which are subversive of administration of revenue. There must be some grievous error in Order passed by ITO, which might set bad trend or pattern for similar assessments, which on abroad reckoning, Commissioner might think to be prejudicial to interests of Revenue Administration . In our view, this interpretation is too narrow to merit acceptance. scheme of Act is to levy and collect tax in accordance with provisions of Act and this task is entrusted to revenue. If due to erroneous order of ITO, revenue is losing tax lawfully payable by person, it will certainly be prejudicial to interests of revenue. 9. 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, for example, when ITO adopted one of courses permissible in law and it has resulted in loss of revenue; or where two views are possible and ITO 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 ITO is unsustainable in law. It has been held by this Court that where sum not earned by person is assessed as income in his hands on his so offering, order passed by Assessing Officer accepting same as such will be erroneous and prejudicial to interests of revenue- Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 [8] INCOME TAX APPEAL No. - 223 of 2013 (SC) and in Smt. Tara Devi Aggarwal v. CIT, [1973] 88 ITR 323 (SC). 10. In instant case, Commissioner noted that ITO passed order of nil assessment without application of mind. Indeed, High Court recorded finding that ITO failed to apply his mind to case in all perspective and order passed by him was erroneous. It appears that resolution passed by board of appellant- company was not placed before Assessing Officer. Thus, there was no material to support claim of appellant that said amount represented compensation for loss of agricultural income. He accepted entry in statement of account filed by appellant in absence of any supporting material and without making any inquiry. On these facts, conclusion that order of ITO was erroneous is irresistible. We are, therefore, of opinion that High Court has rightly held that exercise of jurisdiction by Commissioner under Section 263(1) was justified. 15. In present case, CIT himself while relying upon reply submitted by assessee had partially accepted claim as far as investment in share capital was concerned but it did not accept documentary evidence and reply submitted by assessee before Assessing Officer as far as unsecured loans and creditors are concerned. reliance placed by counsel for Department on aforesaid judgment is of no help to him as he has failed to point out how order of Assessing Officer was erroneous insofar as it is prejudicial to interest of revenue. While counsel for assessee relying upon Para No. 10 of said judgment submitted that order passed by assessing authority was not without application of mind, as same was passed after replying upon documentary evidence submitted by assessee. [9] INCOME TAX APPEAL No. - 223 of 2013 16. Similarly, this Court in case of Anand Kumar Jain (supra) while interpreting language of Section 263 had held that where Assessing Officer passes order without application of mind or incorrect statement of fact or incorrect application of law, then order so passed would be erroneous. But in present case, Assessing Officer after issuing notice and raising certain queries to assessee passed assessment order which cannot be called as erroneous. 17. Reliance has also been placed on judgment of Swarup Vegetable Products (supra), wherein this Court while dealing with case, where assessee received refund of excise duty and placed said amount in suspense account and not in profit and loss account and claimed that this amount should not be included in his income, and stated before Assessing Officer that large part of this amount was claimed by one Sugar Mill who had filed suit and also writ petition claiming said amount and as such, this amount should not be included in his taxable income. This claim was accepted by ITO. However, when matter came to notice of Commissioner, he exercising power under Section 263 held that ITO had not made proper inquiries before accepting claim of assessee, and assessment order was set aside and fresh assessment was directed. This Court refused to interfere in findings of Commissioner as order of ITO was prejudicial to revenue. 18. Similarly, case relied upon by Department in case of Bhagwan Das (supra) also is not applicable in present [10] INCOME TAX APPEAL No. - 223 of 2013 case, as in case in hand Assessing Officer after duly putting assessee under notice and requiring him to produce all relevant documents had passed assessment order. 19. argument of counsel for assessee that mere non-discussion and non-mentioning about reply in order of assessing authority would not lead to assumption that there was no application of mind and order is erroneous. In Krishna Capbox (P.) Ltd. (supra), this Court held as under:- 9. Tribunal further considered question whether discussion of queries and reply received from assessee, in assessment order, is necessary or not. Relying on two judgments of Delhi High Court in CIT Vs. Vikash Polymers [2012] 341 ITR 537/ [2010] 194 Taxman 57 and CIT v. Vodafone Essar South Ltd. [2012] 28 taxmann.com 273/ [2013] 212 Taxman 184 (Delhi), it held that once inquiry was made, mere non discussion or non- mention thereof in assessment order cannot lead to assumption that Assessing Officer did not apply his mind or that he has not made inquiry on subject and this would not justify interference by Commissioner by issuing notice under Section 263 of Act. 10. In Vikash Polymers (supra) relevant part of observations in this regard read as under (page 548 of 341 ITR): "This is for reason that if query was raised during course of scrutiny by Assessing Officer, which was answered to satisfaction of Assessing Officer, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision." 11. Further, relevant observation made in [11] INCOME TAX APPEAL No. - 223 of 2013 Vodafone Essar South Ltd. (supra) in this regard reads as under (page 531 of 1 ITR-OL): "The lack of any discussion on this cannot lead to assumption that Assessing Officer did not apply his mind." 12. Learned counsel for Department could not place any other authority before this Court wherein any otherwise view has been taken. On contrary, learned counsel for assessee has placed before us decision of Bombay High Court in Income Tax Appeal No.296 of 2013 (CIT v. Fine Jewellery (India) Ltd.) [2015] 372 ITR 303/230 Taxman 641/55 taxmann.xom 514 (Bom.) decided on February 3, 2015, wherein also Bombay High Court, following its earlier decision in Idea Cellular Ltd. Vs. Dy. CIT [2008] 301 ITR 407 (Bom.) has taken similar view and said as under (page 307 of 372 ITR): " ...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." 20. In case of Mahendra Kumar Bansal (supra), this Court held that merely because order of ITO is not lengthy, it would not establish that assessment order passed under Section 143(3) of Act is erroneous and prejudicial to intrest of revenue. Relevant Para Nos. 11,12 and 14 are extracted hereinasunder:- 11. In case of Goyal Private Family Specific Trust [1988] 171 ITR 698, this court has held that order of Income-tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand assessment order as erroneous and prejudicial to interests of Revenue and it was for Commissioner to point out as to what error was committed by Income-tax Officer in having reached to its conclusion and in absence of which [12] INCOME TAX APPEAL No. - 223 of 2013 proceedings under Section 263 of Act is not warranted. 12. In case of Belal Nisa [1988] 171 ITR 643 Patna High Court has held that where Income-tax Officer had not carried out necessary enquiry enjoined by section 143(1) of Act Commissioner is within his power in taking action in terms of Section 263(1) of Act. Similar view has been taken in by Patna High Court in case of Smt. Kaushalya Devi [1988] 171 ITR 686. 14. As held by this Court in case of Goyal Private Family Specific Trust [1988] 171 ITR 698, we are of considered opinion that merely because Income- tax Officer had not written lengthy order it would not establish that assessment order passed under Section 143(3)/148 of Act is erroneous and prejudicial to interests of Revenue without bringing on record specific instances, which in present case, Commissioner of Income Tax has failed to do. 21. It is clear that after notice was issued by Assessing Officer raising 28 queries from assessee, which was also replied by him along with documentary evidence in regard to each of query, thus assessment order passed under Section 143(3) of Act would not render same as erroneous and prejudicial to interest of Revenue, unless Commissioner exercising power under Section 263 brings on record to show that order of Assessing Officer is erroneous, as same was passed without application of mind or Assessing Officer had made incorrect assessment of fact or incorrect application of law, but same not being case, and CIT relying upon reply and documentary evidence submitted by assessee granted partial relief, as such order dated [13] INCOME TAX APPEAL No. - 223 of 2013 09.02.2012 passed under Section 263 relegating back matter to Assessing Officer as regards unsecured loans and creditors is unsustainable. 22. Having examined matter at length on facts as well as on law, we are of considered opinion that in present case, it is abundantly clear that order passed by Assessing Officer was neither erroneous nor prejudicial to interest of Revenue. 23. In view of above, order dated 02.04.2013 passed by Income Tax Appellate Tribunal, Delhi Bench E New Delhi and revisional order dated 09.02.2012 passed by Commissioner Income Tax, Meerut under Section 263 are set aside. 24. question of law is therefore answered in favour of assessee and against Revenue. appeal stands allowed. 25. However no order as to costs. Order Date :- 14.08.2019 V.S.Singh Meerut Roller Flour Mills Pvt. Ltd. v. Commissioner of Income-tax And Another