2014-VIL-910-ITAT-IND

Income Tax Appellate Tribunal INDORE

ITA NOS. 366 TO 372/ IND/2013

Date: 31.10.2014

MUKESH SHARMA

Vs

COMMISSIONER OF INCOME TAX, CIRCLE 1 (1) , BHOPAL (M. P).

For the Appellant : Ms. S. S. Deshpande & Shri Ashok Vijayvargee, C.A.’s
For the Respondent : Shri M. S. Powar, CIT / D.R.

BENCH

SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI MUKUL SHRAWAT, JUDICIAL MEMBER

JUDGMENT

PER P.K. BANSAL

These appeals have been filed by the assessee against the common order of CIT, Bhopal dated 28.03.2013 for the assessment years 2003-04 to 2009-10 passed u/s 263 of the Income Tax Act by taking the following common grounds of appeal in each of the assessment year:-

“1. That, on the facts and circumstances of the case and in law, the ld. Commissioner of Income tax has erred in cancelling the assessment completed u/s 143(3) of the Act vide assessment order dt. 28.03.2013 holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue with the direction to reframe the assessments after examining the issues.

2. That, on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax has erred in cancelling the assessment completed u/s 143(3) of the Act vide assessment order dt. 28.03.2013 holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue with the direction to reframe the assessments after examining the issues, whereas the impugned assessment order has already been merged with the appellate order dated 30.01.2013 passed by the Ld. Commissioner of Income Tax (Appeals), Raipur (CG), camp at Bhopal, M.P.”

2. The grounds of appeal in each of the assessment year are common therefore all these appeals are disposed of by this common order. The brief facts of the case are that the CIT, after pursuing the assessment records, was of the prima facie view that consolidated assessment order for the assessment years 2003-04 to 2009-10 passed vide order dated 31.12.2010 by the than Dy. Commissioner of Income Tax, 1(1), Bhopal u/s 153A r.w.s.143(3) of the Income Tax Act 1961 was erroneous and pre-judicial to the interest of the revenue. Accordingly, the CIT issued show cause notice to the assessee dated 25.3.2013 which states as under :-

“On examination of records, it was found that the order u/s 143(3) passed on 30.12.2011 by the Assessing Officer is erroneous in so far as it is prejudicial to interests of revenue as:-

1. During the search and seizure action u/s 132 of Income Tax Act, 1961 at your residence on 21.07.2008 certain documents were found and seized. Based on these documents, detailed enquiries were carried by the Income Tax authorities.

2. In your statement recorded on oath on 20.08.2008, vide question no. 2 you were enquired about LPS 1/1 page 71 to 75 dealing with the agreement dated 24.05.2008 between Shri Vinod Vaish and his family and you and your friends. You had paid 50 lacs in this regard, further it was found that the said land had been sold through registered deed. You were enquired in the statement regarding the sources of the payment made for the above land.

2.1 In your answer to question no. 2 of the statement recorded on 20.08.2008 you had deposed on oath that out of Rs. 5 crores you had paid Rs. 50 lacs out of your account, the balance Rs. 4.50 crores was also invested by you in various names in the purchase of property. This 4.50 crores was admitted by you as your undisclosed income. Further, you had also stated that whatever the tax liability was due on this amount, you were ready to pay the same.

2.2 Your admission made under oath warranted an addition of Rs. 4.50 crores however, the Assessing Officer has erroneously made an addition of Rs. 87,46,000/- only against the self admitted disclosure of Rs. 4.50 crores. This has resulted in under assessment of your income by Rs. 3,62,54,000/-. This shows that the assessment under is erroneous in so far as it is prejudicial to the interests of Revenue.

3. Similarly in the statement recorded on oath on 20.08.2008 before the DDIT (inv.) – I, Bhopal vide question no. 3 of the statement you were asked to clarify financial transactions recorded in the various spiral dairies found and seized from your house and your office.

3.1 In your answer to question no. 3 of your statement dated 20.08.2008 you had deposed on oath that in the several dairies and lose papers found and seized during the search, transactions relating to consultancy, money lending transactions, real estate transactions, done by you in the name and family members and friends were recorded. You also deposed that in these documents transactions of deposits made by you in the bank accounts of your family members. You had admitted Rs. 4 crores as your additional undisclosed income on account of the transactions recorded in these dairies.

3.2 However, the Assessing Officer has erroneously failed to make any addition on this account. This has resulted in under assessment of income by Rs. 4 crores. This shows that the assessment order is erroneous in so far as it is prejudicial to the interests of Revenue.

4. In your statement on oath recorded on 21.07.2008 vide question no. 4 your were enquired in relation to page 78 LPS 1/1 wherein you had shown some loan transactions against your name and in the name of your wife, Smt. Neena Sharma totaling to Rs. 1.11 crores in the year of search. You were also enquired about the loans appearing in the name of Sh. Rajesh Bajaj, Sh. Manohar Lal Bajaj, Ms. Riya Bajaj, Ms. Chandra Bajaj etc. whose names appeared in the LPS and were enquired about their antecedents, their address and whether the loans shown were genuine.

4.1 In your answer to question no. 4, you had deposed on oath that these entries shown in the form of loans from various persons was actually your undisclosed income which had been shown in the form of loans. You had also stated that you were ready to pay the tax due on Rs. 1.11 crores.

4.2 However, the Assessing Officer made an addition of Rs. 70,00,000/- only on this account, thus erroneously failed to make an addition of 41,00,000/- inspite of your admitted disclosure of undisclosed income of Rs. 1.11 crores even in absence of any reasonable evidence to support genuineness of loans. This shows that the assessment order is erroneous is so far as it is prejudicial to the interests of Revenue.

5. In your statement on oath recorded on 21.07.2008, vide question no. 8 you were enquired about page 130 of LPS 1/1 in which the M/s Shikhar Builders had given a loan of Rs. 10,00,000/- to you on 2.7.2008.

5.1 In your reply to question no. 8 of the statement recorded on 21.7.2008, you had deposed that you had shown this transaction as a loan to provide “entry‟ of Rs. 10,00,000/-. This was actually your own money which had been shown as a loan entry. You had admitted this bogus entry of Rs. 10,00,000/- as your undisclosed income for the relevant year.

5.2 However, the Assessing Officer erroneously failed to make an addition of Rs. 10,00,000/-, inspite of your self admitted disclosure even in the absence of any reasonable evidence to support genuineness of loan. This shows that the assessment order is erroneous in so far as it is prejudicial to the interests of Revenue.

6. In your statement recorded on 21.07.2008, vide question no. 17, you were asked regarding page 81 of LPS 1/7 which pertained to agreement for the purchase of agricultural land from Sh. Sukhram in which Rs. 3 lakhs had been paid and the balance Rs. 13.68 lakhs was payable.

6.1 In your reply to question no. 17 in your statement recorded on 21.7.2008, you had deposed that the agreement had not been concluded but you had paid Rs. 3 lakhs to Sh. Sukhram in cash which was out of your undisclosed income. You had admitted this amount of Rs. 3 lakhs as your undisclosed income.

6.2 However, the Assessing Officer erroneously failed to make an addition of Rs. 3,00,000/- inspite of your self admitted disclosure. This shows that the assessment order is erroneous in so far as it is prejudicial to the interests of Revenue.

7. In your statement on oath recorded on 21.7.2008, vide question no. 25, you were asked regarding the amount of Rs. 3 lakhs in cash in your possession and Rs. 4 lakhs cash given by you to your mother. Further, you had stated in the statement recorded that you had shown your agricultural and licensing income on estimated basis and that no books were being maintained by you. You were asked to comment on these discrepancies.

7.1 In your answer to question no. 25 of your statement recorded on oath, you had deposed on oath that keeping in view the discrepancies, you had admitted the said amount as your undisclosed income. Further, in the Financial year 2008-09, you had also admitted Rs. 1 crores as your undisclosed income.

7.2 However, the Assessing Officer erroneously failed to make any addition of this amount inspite of yourself admitted disclosure. This shows that the assessment order is erroneous in so far as it is prejudicial to the interests of Revenue.

In view of the above, the assessment order passed by the Assessing officer is erroneous in so far as it is prejudicial to the interests of revenue and is therefore, proposed to be cancelled u/s 263 of the I.T. Act, 1961. You are hereby given an opportunity of being heard as per section 263(1) of the Income Tax Act to present yourself in person or through an authorized representative on 28.03.2013 at 11 A. M. to explain your case. In case you do not wish to be heard in person, you may submit a written reply which shall be considered sufficient compliance of this notice. In case no reply is received from your end by the stipulated date, it will be presumed that you have nothing to say in the matter and a decision will be taken on the basis of material available on records.”

3. In reply thereto, the assessee filed his objections before the CIT challenging the action to be taken by the assessing officer by taking the following contentions:-

“Sir, our point by point submission on all the above issues as raised in your show cause notice u/s 263 of the Act are as under:-

1. Sir, this issue was elaborately discussed by the Assessing Officer in paragraph 6 page number 45 to 59 of the assessment order wherein a detailed discussion was made regarding LPS 1/1 page 71 to 75. In these paragraph the scanned copy of LPS 1/1 page 71 to 75 was also printed. It is submitted that, on page number 46 of the assessment order the Assessing Officer has specifically discussed the issue of surrender as under:

“When Shri Mukesh Sharma was confronted with these documents at the time of search action, he had stated in his statement recorded u/s 132 of the Income Tax Act that these pertain to land deal with Shri V Vaish and others and that he along with the other purchaser had paid Rs. 5 Crore only plus registry charges. Later on, in another statement recorded on 20.08.2008 he admitted that the entire amount of Rs. 5 Crores pertains to him and that he was ready to surrender that amount and his undisclosed income in therelevant period. Vide questionnaire dated 13.09.2010, the assessee was asked to explain as to why this amount of Rs. 5,00,00,000/- (Plus Rs. 49,18,335/- being expenses towards registry charges, stamp & other fees) admitted by him should not be considered while making assessment of his income.”

The Assessing Officer on page number 49 further states as under:-

“ The reply filed by the assessee has been carefully examined and considered. During the course of enquiries it has been found that the purchasers other than Shri Mukesh Sharma have subsequently filed their returns of income for A. Y. 2009-10 at Gwalior wherein their stated share of investment stands disclosed. Thus the assessee‟s interest/share in the property works out to 1/10th only (50 lakhs out of the total stated consideration was paid by him).”

“However the assessee‟s denial regarding payment “ON Money” can not be accepted because of the overwhelming and clinching evidence available on record.”

Sir, the Assessing Officer findings were finally concluded in this regard in page number 59 as under:-

“Since the assessee‟s share in the stated consideration is 1/10th only, the unaccounted payment made by the assessee is held to be Rs. 87,46,000/- which is his undisclosed income for the A. Y. 2009-10. Penalty Proceedings u/s 271AAA of the I.T. Act are being initiated.”

“The balance addition will be considered in the hands of the 14 other persons of Dabra in whose names, the land has been purchased and /or the actual person who has made investment in the name of these 14 persons.”

Sir, from the discussion as above, it is apparently clear that the Assessing Officer has well considered the surrender of Rs. 5 Crore and the documents LPS 1/1 page 71 to 75 and after detailed investigation has given his findings as above by making addition of Rs. 87,46,000/- being 1/10th share of the assessee of the unaccounted payment made by him and added the same as his undisclosed income for A. Y. 2009-10.

Thus, it is not correct to say that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue on this issue.

2. Sir, you have mentioned that during the course of search various spiral dairies and several loose papers were found and seized during the course of search in which certain financial transactions, transaction relating to consultancy, money lending transaction and certain real estate transaction of the assessee and his family members and friends were recorded. In this reference, it is submitted that all the transactions recorded in the diaries and loose papers were elaborately discussed in the assessment order on various pages. In your notice, no specific document was mentioned which is not discussed by the Assessing Officer in the assessment order which itself proves that all the documents are well considered in the assessment order and nothing was left to be considered from which it could be ascertain that the order is erroneous or prejudicial to the interest of the revenue on this issue.

Regarding, the admission of Rs. 4 Crores as additional undisclosed income on account of various transaction stated as above, it is submitted that in the return filed for A. Y. 2009-10 the assessee has shown the income for consultancy of Rs. 2,09,70,000/- and other consultancy income of Rs. 2,07,42,000/- and offer the same in the return as income from undisclosed sources. Thus, it is apparently that the income arises as per the loose papers and diaries other than, as discussed in the assessment order on various heads is disclosed by the assessee in the return filed for A. Y. 2009-10 as income from undisclosed sources. Thus, the order is not erroneous on this issue.

3. Sir, regarding the undisclosed income of Rs. 1,11,00,000/- on account of loan of various persons like Shri Rajesh Bajaj, Shri Manoharlal Bajaj, Miss. Riya Bajaj and Miss. Chandra Bajaj etc. as appeared in page 78 LPS 1/1, it is submitted that the issue was well considered by the Assessing Officer on paragraph number 8 page 61 to 69 of the assessment order wherein the name of all the aforesaid persons has been appeared and after giving the detailed findings and considering the explanation offered by the assessee during the assessment proceedings, the Assessing Officer has considered Rs. 41,00,000/- as explained and Rs. 70,00,000/- was added being not properly explained. Thus, the order passed by the Assessing Officer is not erroneous and has not prejudicial to the interest of the revenue.

4. Sir, this issue was also discussed in paragraph 8 page number 61 to 69 of the assessment order and particularly on page number 67 wherein it is mentioned by the Assessing Officer that the issue of M/s Shikhar Builders was well considered and hence, no addition is made on this account. Sir, being this issue was also well considered by the Assessing Officer at the time of passing the assessment order and the addition was not made after satisfying the explanation offered by the assessee, it cannot be said that the order passed by the Assessing Officer is erroneous on this issue.

5 & 6 Regarding point number 5 and 6 above, pertaining to Rs. 3,00,000/- paid to Shri Sukhram as advance against land and Rs. 3,00,000/- cash found and Rs. 4,00,000/- being cash given to mother, it is submitted that the Assessing Officer has considered all these issues while passing the assessment order as all the documents found during the search were well discussed and found place in the assessment order. Further, this is included in the income of Rs. 4,13,05,005/- as surrendered by the assessee in the return filed for A. Y. 2009-10 and hence no separate addition was made by the Assessing Officer in the assessment order. Hence, it cannot be said that the order is erroneous and prejudicial to the interest of revenue on this issue.

7. Regarding the addition of Rs. 1 Crore as undisclosed income in A. Y. 2009-10, it is submitted that the assessee has filed the Balance Sheet and Profit and Loss account along with the return and surrendered Rs. 4,13,05,005/- as his income from undisclosed sources which includes the income of Rs. 1 Crore also which is admitted to be surrendered in A. Y. 2009-10. Sir, the assessee himself declared Rs. 4,13,05,005/- in the return filed for A. Y. 2009-10 which is much above the amount of Rs. 1 Crore which is agreed to be surrendered in the A. Y. 2009-10.

Sir, in the light of above, it is respectfully submitted that all the issues raised in your show cause notice u/s 263 are well considered by the Assessing Officer at the time of assessment proceedings and the assessment order passed after considering all the issues and the additions were also made wherever applicable when the explanation offered by the assessee is not found genuine or lack of evidence. Hence, it is not correct to say that the order passed by the Assessing Officer is erroneous and hence prejudicial to the interest of the revenue.

Sir, as per the Act, the commissioner is empowered to revision of orders which are prejudicial to revenue as stated u/s 263 as under:-

“263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.”

Sir, a bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the AO is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order of the AO sought to be revised is erroneous, and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent – if the order of the AO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue- recourse cannot be had to section 263(1) [Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83, 87 (SC)]

Further, the error envisaged by section 263 is not one which depends on possibility or guesswork, but it should be actually an error either of fact or of law [CIT v. Trustees of Anupam Charitable Trust, (1987) 167 ITR 129 (Raj.)].

Sir, only if it is self-evident and apparent from the record that the assessment order is erroneous either on the facts or on law or if the assessment order is perverse in so far as it has drown conclusions which no authority should have drown or it has ignored various significant facts on record or the law, would a revision be justified. The revisional authority must either set out briefly the heads of the charge that emerge under the head of error, vis-à-vis the assessment order, or more importantly, it must record the material that would justify the revision [State of Karnataka v. Marico Industries Ltd., (2001) 124 STC 196, 200 (Karn)].

Sir, the revisional power under section 263 is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination “to consider‟ or in other words, to form an opinion that the particulars order is erroneous in so far as it is prejudicial to the interests of the Revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration of an order of assessment, which has already been concluded and controversy which has been set at rest, is set again in motion. It is an important decision and the same cannot be based upon the whims or caprice of the revising authority. There must be materials available from the records called for by the Commissioner. This is so because it is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority.

The expressions “erroneous‟, “erroneous assessment‟ and “erroneous judgment have been defined in Black‟s Law Dictionary, Sixth Edition, page 542. According to the definition, “erroneous‟ means “involving error, deviating from the law‟. “Erroneous assessment‟ refers to an assessment that deviates from the law‟. “Erroneous assessment‟ refers to an assessment that deviates from the law and is therefore invalid, and is defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly,“erroneous judgement‟ means “one rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles‟.

From the aforesaid definitions, it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Assessing Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Assessing Officer, who passed the order, unless the decision is held to be erroneous.

Sir, it is held by various court that the revisional power is not meant to be exercised to correct every error of fact, but the error must be of such a nature that it is erroneous and prejudicial to the interest of the Revenue. Further, the power of revision is not to meant to be exercised for the purpose of directing the officer to hold another investigation when the order of the officer was not found to be erroneous or further inquiry will not result to more revenue. (CIT v. Sakthi Charities (2000) 160 CTR Mad, 107.)

Sir, it is further held that proceedings should not be initiated with a view to start fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well accepted policy of law that there must be a point of finality in all legal proceedings, that state issues should not be reactivated beyond a particular stage and that lapse of time must induce response in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity (CIT v. Gabrial India Ltd. (1993) 203 ITR 108 (Bom.).

Sir, the factual matrix stares in the face of the record in the light of the legal requirement of a satisfaction that involving of the power u/s 263 necessarily.

Sir, in our case against the order passed u/s 153A, the assessee has filed an appeal before the Hon‟ble CIT (Appeals) – 1, Bhopal and Vide order dated 30.01.2013 passed by the CIT (Appeals), Raipur camp Bhopal has granted substantial relief on most of the issues which are added in the assessment. By passing the order u/s 263 on the same issues which were deleted by the Hon’ble CIT (Appeals) is not justified.

Sir, it is held by various courts that after passing the order by CIT (Appeals), the revisional powers of Commissioner comes to an end because the entire order of the Assessing Officer is merged in the order of first appellate authority.

Sir, it is held by various courts that where the assessee had furnished the requisite information and the Assessing Officer had completed the assessment after considering all the facts but the Commissioner revised the assessment order on the ground that the Assessing Officer had not made proper enquiries, the Tribunal was held justified in reversing the order of the Commissioner and restoring that of the Assessing Officer.

Sir, it is humbly submitted that in our case, as apparent from the assessment order it self, all the discrepancies as stated in the notice u/s 263 has been considered by the Assessing Officer before passing the assessment order and are part and partial of the assessment order. Further, detailed inquiry was made by the Assessing Officer before completing the assessment on different issues as mentioned in your notice u/s 263 and hence also action u/s 263 is not required.

In the light of our above submission, it is respectfully submitted that the revisional proceedings initiated u/s 263 of the Act may kindly be dropped….”

4. CIT did not agree with the submissions of the assessee but took the view that the assessment order passed on 30.12.11 is erroneous in so far as prejudicial to the interest of revenue and accordingly, he cancelled the same u/s 263 of the Income Tax Act, 1961 and directed the assessing officer to reframe the assessment in each of the assessment years after examining these issuesafresh and affording sufficient opportunities of being heard to the assessee by observing as under vide order dt.28.3.13:-

“I have carefully examined the records of the assessment proceedings, and explanations submitted by the assessee, keeping in view the relevant provisions of law and judicial precedents.

11.1 The assessee has challenged the jurisdiction of section 263 mainly on the ground that the Assessing Officer has examined all the issues during the assessment proceedings. However, it is evident from the record that the Assessing Officer has not examined many of the issues arising out of voluntary disclosure made u/s 132(4) of I.T. Act, 1961 by the assessee which warranted adjudication by him. Further, the Assessing Officer has also not carried out any independent enquiries on these issues before forming any opinion. Thus, the assessment order is erroneous in so far as it is prejudicial to the interests of revenue.

11.2 Another main argument of the assessee is that after passing the order by CIT (Appeals), the revisional powers of the Commissioner comes to an end because the entire order of the Assessing Officer merges into the order of first appellate authority. This argument is not plausible for the reason that the additions which were subject matter of appeal before the CIT(Appeals) are not subject matter of the present order under section 263. The Ld. CIT(Appeals) has considered only those additions which were made in the assessment order, while in the present proceedings, the additions which were not made in the original assessment are being considered. It clearly shows that the issues involved in the assessment order and appellate order are different from the issues involved in the instant proceedings under section 263. In the case of CIT vs. K C Rajput (1987) 32 TAXMAN 326 (MP) (FB), the Hon‟ble High Court of Madhya Pradesh (Full Bench), held that in a case where assessment order is subject matter of appeal, the Commissioner can make revision under section 263 only of that part which was not subject matter of appeal. In the present order the subject matter involved are different from subject matter of appeal decided by the CIT(Appeals).

12 The other arguments of the assessee are also not plausible for the reasons that in view of the facts of the cases, it is evident that the assessment order is erroneous in so far as it is prejudicial to the interests of revenue.

12.1 The assessee has relied on the ratio laid in Malabar Industrial Co. Ltd. v/s CIT 243 ITR 83 (SC). The conditions laid in the said judgment are duly satisfied in the assesse‟s case as the assessment order is not only erroneous but is also prejudicial to the interests of revenue.

12.2 The assessee has also relied on the ratio laid in CIT v/s Trustees of Anupam Charitable Trust (1987) 167 ITR 129 (Raj). The conditions laid in the said judgment are also duly satisfied in the assesse‟s case as errors subject matter of this order are not which depends on possibilities or guess work but is an actual error.

12.3 The facts of the case clearly show that fresh assessment will certainly result in more revenue. Hence conditions laid in CIT v/s Shakthi Charities (2000) 160 CTR 107 (MAD) are also duly satisfied.

12.4 The ratio laid down in CIT v/s Gabrial India Ltd. (1993) 203 ITR 108 (Bom) is not applicable in the case of the assessee, since the enquiry ordered in this order are specific and are based on seized documents and admission made by the assessee on oath.

12.5 The ratio laid down in State of Karnataka vs. Marico Industries Limited (2001) 124 STC 196 (Kar) is not applicable in case of the assessee as the said judgment is in relation to the revision proceedings under Karnataka Sales Tax Act, 1957 and not Income Tax Act, 1961. Nevertheless, the conditions of said judgment are duly met in this case as the notice u/s 263 is very detailed and contains all the documentary and testamentary evidence in support of such a belief.

13. It is important to note that admission of undisclosed income was made by the assessee in his statements recorded on oath in July and August 2008. The assessee has not denied the facts deposed in these statements until assessment proceeding in December 2010. There is a long gap in admission on oath of unaccounted income and denial of the portion of unaccounted income during the assessment proceedings. It is well settled law that an admission prejudicial to the interests of person making the deposition is more reliable than an admission made by same person in his own interest. A self damaging statement is more reliable than a self serving statement. In fact, the assessee has not made any deposition on oath within reasonable time of making the admission on oath in which he had admitted unaccounted income and had stated to pay tax payable on such unaccounted income. These facts clearly show that the admissions made by the assessee in the statement recorded on oath were reliable evidences which the Assessing Officer has wrongly ignored.

14. In view of the above, I Consider that the assessment orders u/s 143(3) passed on 30/12/2011 is erroneous in so far as it is prejudicial to the interests of revenue and is therefore cancelled u/s 263 of the I.T. Act 1961. The Assessing Officer is directed to reframe the assessments after examining the above issues and affording sufficient opportunities of being heard to the assessee.”

5. Before us the Ld. A R submitted that the assessee is an individual deriving the income from the business of property brokerage and consultancy in immovable properties. A search was conducted at the residential premises of the assessee on 21.07.2008. During the course of search many loose papers were seized. In the statements recorded u/s. 132(4), the assessee accepted and surrendered income on the basis of the loose papers found. However, while filing the returns, the assessee retracted from part of these surrendered income and filed the returns declaring additional income in the various years. For the A.Y. 2009-10, the assessee offered the additional income of Rs. 4,13,05,000/-. This income includes the surrender of Rs. 4 cr as well as other surrender of Rs. 10 lacs (3+3+4) under the business income. During the course of the assessment proceedings, the assessee filed an affidavit along with the letter dated 08.12.2010 stating that he had given the statement on 21.07.2008 and declared the amount of Rs. 1.5 crores being share capital investment, Rs. 4 crores being investments in land and the overall declaration of Rs. 12.5 crores were not correct declaration and these incomes does not constitute the correct income and as such, the returns filed in response to notice u/s. 153A show the correct income and there are no other undisclosed income. The AO has discussed this affidavit on pages 13, page 23, page 28, page 29, page 64, page 65. The AO after rejecting the affidavit has made various additions on the basis of the papers, spiral diaries, and documents found and on the basis of the enquiries made during the course of the assessment proceedings. The assessments were approved by the Additional Commissioner u/s. 153D. Thus, it was contended that even the higher authority has considered the additions made by the AO. The assessee went in appeal for part of the additions made by AO. Part of the additions are deleted by the CIT (A) vide order dated 30.01.2013 for which our attention was drawn to the order of the CIT(A).

6. It was further submitted that Subsequent to the order of CIT(A), the Ld. CIT issued the common show cause notice u/s. 263 for the A.YRs. 2003-04 to 2009-10. On all the points, the CIT has stated that in the statements recorded u/s. 132(4), the assessee has surrendered the different income as enumerated in the said show cause notice, but the same has not been assessed to tax. The CIT has basically relied on the surrender made and came to the conclusion that the AO has erroneously failed to make the additions of these amounts on the basis of the statement recorded u/s. 132(4). The CIT did not take any cognizance about the affidavit and the various replies on each query filed during the course of the assessment. It was submitted that all these additions have been discussed in detail by the AO and after taking into consideration the various documents seized and the enquiries made during the course of the assessment proceedings, the additions have been made in the assessment. This is not the case of no enquiry. It was further submitted that on all the points, the CIT(A) has considered the submissions made by the assessee and has given appropriate relief on various issues.

7. It was further submitted that it is apparent from the order of the CIT that all the points referred to pertain to the A.Y. 2009-10. The reopening of the assessment on the points referred to the A.Y. 2009-10 cannot be the ground for revising the assessment of the earlier years. Thus, the order passed to the extend relate to the earlier year is bad in law and deserves to be cancelled.

8. Regarding point no. 3 about the agreement dated 24.05.2008 with Shri Vinod Vaish, it was vehemently submitted that this has been duly considered and examined by the AO in detail from pages 45 to page 59 i.e. in nearly 15 pages. The AO has also made various enquiries about the bank accounts of the purchaser (page 55 to 57). Discussed about the statement recorded during the course of the search (page 46), issued the questionnaire and discusses the reply submitted by the assessee (page 47-49) and then arrives at the conclusion that the assessee had made the unrecorded payment or Rs. 87,46,000/- (page 59). Against the said addition, the assessee went in appeal before the CIT(A). The CIT(A) after discussing the detailed arguments and after considering the various papers, deleted the said addition. In this regard attention was invited to the order of the CIT(A) para 5 ground 8 (page 19 onwards).

9. Regarding the surrender of 4 crores in para 4 on account of loose papers, the AO has made various additions on account of loose papers. The addition in respect of purchase of property, the same was already disclosed in the Balance Sheet of various years. The assessee has already surrendered Rs. 4.13 crores in the A.Y. 2009-10 and for other years amounting to Rs. 45.85 lakhs in the different assessment years. The income so surrendered by the assessee in the return has duly been accepted by the assessing officer and in addition to this income, the assessing officer made additions certain additional addition. In this regard attention was drawn to page 28, 32, 36, 40, 44 and 48 of the paper book.

10. Regarding the additions of loans as mentioned in para 5 about the addition of Rs. 1.11 crores, the AO has discussed this point from pages 62 to 69 and has made the addition of Rs. 70 lakhs. The Ld. AO has also narrated the question put to the assessee and the disclosure made on page 65. The Ld. CIT(A) has after considering the detailed submissions in para 4 ground 7, has restricted the addition to Rs. 5 lakhs. For this attention was invited to the order of the CIT(A). It was further submitted that the assessing officer has also discussed while discussion this surrender the unsecured loan of Rs. 10 lacs relating to Shikhar Builders and came to the conclusion that the loan was genuine and the assessee discharged his burden of proof as envisaged u/s 68 of the Income Tax Act, 1961.

11. Regarding the addition of loan in para 6, the point has been discussed by the AO in para 8 page 61 to 69 and has specifically came to the conclusion that in the case of Shikhar Builders, no addition is required to be made . In this regard, attention was invited to the order of the assessing officer at page 67.

12. Regarding the addition mentioned in para no. 7 about the advances to Sukhram and the cash in hand, the Ld. AO has considered all the papers and it is submitted that the same is already covered under the disclosure made of additional income and has been shown in the Balance Sheet as on 31.03.2008 under the head Kala Paani Land. It is pertinent to note that the assessee has offered an additional income of Rs. 18,00,000/- for the A.Y. 2008-09 for which attention is drawn to page 44 of the paper book.

13. Ultimately, it was submitted that the order of the Ld. CIT is bad in law due to the following reasons:-

i. All the additions have been duly considered and discussed by the AO and as such the CIT has no power u/s. 263 to take a contrary view. The points have been considered very much in detail and after discussing the same in number of pages, the AO has made the additions. The AO has, at number of places, discussed about the retraction and after considering the documents/loose papers has made the additions. Thus, it is submitted that the action u/s. 263 cannot be taken when the points have been considered by the Ld. AO while framing the assessment. In this connection, attention was drawn to the various judgments as quoted before the CIT. Reliance was also placed on the following decisions:

a. CIT v/s. Software Consultants 341 ITR 240 (Del.)

b. CIT v/s. Anil Corporation 213 Taxmann 19

c. CIT v/s. Sunbeam Auto Ltd. 332 ITR 167 (Del.)

d. CIT v/s. Makal Suta Cotton Co. P. Ltd. 275 ITR 54(M.P)

e. CIT v/s R.K. Construction Co., 313 ITR 65 (Guj.)

f. CIT v/s Max India, 295 ITR 282 (SC)

g. CIT v/s Ratlam Coal Ash Co., 171 ITR 141 (M.P)

h. CIT v/s Arvind Jewellers, 259 ITR 502 (Guj.)

i. CIT v/s Vodafone Essar South Ltd, 212 Taxmann 184 (Del.)

j. CIT v/s Mehrotra Brothers, 270 ITR 157 (M.P)

k. CIT v/s Shri Govindram Seksariya Cahrity Trust, 166 ITR 580 (M.P)

l. Hari Iron Trading Co. v/s CIT, 263 ITR 437 (P&H)

m. CIT v/s HARI Singh & Associates, 267 CTR 442 (Raj.)

n. CIT v/s Shalimar Housing & Finance Ltd., 24 DTR 58 (M.P)

ii. It was further submitted that the points referred by the CIT have all been considered by the CIT(A) and as such on the same point, the action u/s. 263 cannot be taken. Reliance was placed in this regard on the full bench judgment of MP High Court in the case of CIT v/s. Rajput reported in 164 ITR 197 wherein it was held that CIT has no power u/s. 263 to revise the order which merged with the order of the Appellate Assistant Commissioner. It is further submitted that explanation (c) to section 263 provides that where any order referred to in this sub-section and passed by the Assessing Officer has been the subject matter of any appeal, the powers of the Commissioner under this sub-section shall extend to such matters as had not been considered and decided in such appea.

iii. The orders for the A.YRs. 2003-04 to 2008-09 cannot be set aside since the points noted by the Ld. CIT do not pertain to these assessment years. For this attention was drawn towards computation statement of the return for the assessment years 2003-04 to 2008-09 available in the the paper book as well as copy of the statements recorded.

Thus it was vehemently contended that the order passed by CIT u/s 263 be quashed.

14. The ld. D.R on the other hand vehemently relied on the order of the CIT. The assessing officer has not conducted due inquiry. The assessee has made surrender in the statement recorded u/s 132(4) on 21.7.2008 and 20.8.2008 before the DDIT, Investigation but did not return the income as has been surrendered. The assessing officer has not made the proper inquiry how the assessee has retracted the statement. It is not a case for merger of the order of CIT(A) with the assessment order. The assessing officer had not made any addition in respect of point no.5 relating to the loan of Rs. 10,00,000/- given to M/s Sikhar Builders, point no.6 relating to Rs. 3,00,000/- paid to Sukram in cash, point no.7 relating to Rs. 3,00,000/- in cash in possession of the assessee and Rs. 4,00,000/- cash given by the assessee to his mother. In the absence of any addition being made by the assessing officer on these issues, these issues were not before the CIT(A) and to that extent it cannot be said that the assessment order got merged with the order of CIT(A). The CIT(A) only considered the disputed issues. This resulted in under assessment and therefore the order passed by AO was erroneous and pre-judicial to the interest of the revenue. It is a case of no proper inquiry or lack of inquiry being made by the assessing officer on certain issues. This is the settled law that even if order passed u/s 263 is valid on certain issues, the proceeding u/s 263 shall be valid. Reliance was placed by the ld. A.R on the following decisions :-

(a) CIT Vs K. L. Rajput, 164 ITR 197 (M.P) (F.B).

(b) CIT Vs Kohinoor Tobacco Product Pvt. Ltd, 234 ITR 557 (M.P).

(c) Malabar Industrial Co. Ltd Vs CIT, 243 ITR 83(SC).

(d) Bhagirath Aggarwal Vs CIT, 351 ITR 143 (Del.).

Thus it was contended that there was no illegality in the order passed u/s 263 and the order passed be confirmed.

15. We have carefully considered the rival submissions and perused the material on record along with the case laws as relied on from both the sides before us as well as the order of the CIT passed u/s. 263 of the Income Tax Act.and the assessment orders passed by the assessing officer. Before deciding the issue whether the order passed by the CIT is valid and in accordance with law laid down u/s 263, It is necessary for us to discuss the provisions of section 263 which empowers the CIT to revise the assessment order. Section 263 lays down as under:-

 “263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, -

(a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include -

(i) an order of assessment made by the Assistant Commissioner or Deputy Director or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A;

(ii) an order made by the Joint Commissioner in exercise of the power or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under section 120;

(b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner;

(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.

 (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.

(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.

Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.”

16. From the perusal of the aforesaid section, it is apparent that there are four main features of the power of revision to be exercised u/s 263 by the Commissioner of Income-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under the Act and for this purpose he need not to show any reason or record any reason to believe as is required u/s 147 or 148(2). It is a part of his administrative power to call for the record and examine them relating to any assessee which falls under his jurisdiction. Secondly, he may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the Revenue. This is exercised by calling for and examining the record available at this stage. There is no question of the assessee to appear and make submission at this stage. Thirdly, if after calling for and examining the records the Commissioner considers that the order of the Assessing Officer is erroneous in so far it is prejudicial to the interest of the Revenue, he is bound to give an opportunity to the assessee of being heard and after making or causing to be made such enquiry as he may deem fit, pass such order thereon as the circumstances of the case may justify including an order enhancing or modifying the assessment or cancelling assessment and directing a fresh assessment. This empowers the CIT to cause or make such enquiries as he deems necessary. Fourthly, the CIT u/s 263 can enhance or modify the assessment as a result of enquiry conducted and hearing of the assessee.

17. For invoking the provisions of section 263, both the conditions that the order passed by the A.O. is erroneous and also that it is prejudicial to the interest of Revenue must be satisfied. If one of them is absent, the provisions of section 263 cannot be invoked. The term “erroneous‟ has not been defined under the Income-tax Act but it is well settled that each and every type of mistake or error committed by the A.O. cannot be said to be an error. The expressions “erroneous‟, “erroneous assessment‟ and “erroneous judgment have been defined in Black‟s Law Dictionary, Sixth Edition, page 542. According to the definition, “erroneous‟ means “involving error, deviating from the law‟. “Erroneous assessment‟ refers to an assessment that deviates from the law and is therefore invalid, and is defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly,“erroneous judgement‟ means “one rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles‟. Thus, an order can be said to be erroneous if there is incorrect assumption of facts or incorrect application of law by the A.O. If the A.O. after making the enquiries and examining the records taken one of the possible view, it cannot be said that the order passed by the A.O. was erroneous until and unless the view taken by the assessing officer is unsustainable in law. If the assessing officer has not carried out any enquiry, it can be said that the order passed is erroneous as due process of legal principals have not been followed. From the show cause notice of the CIT, it is apparent that the CIT has treated the order to be erroneous as well as pre-judicial to the interest of the revenue as the assessing officer has not made the addition on the basis of the statement recorded during the course of the search carried out at the residence of the assessee on 21.7.2008 by which the assessee has made surrender of certain undisclosed income. It is not the case of the CIT that the assessing officer has not examined the statement recorded during the course of search and also as has been recorded before the DDIT. The CIT noted that the assessee has made disclosure in the statement on the basis of the document found and seized during the course of the search. CIT has referred to question no.2, 3, 4, 8, 17 and 25 asked from the assessee while recording the statement during search and reply given by the assessee in respect of these questions. CIT was of the opinion that in respect of question no.2,3,4 the assessing officer has not added the income as was required to be added while in respect of question 8,17 and 25 assessing officer failed to make any addition even though assessee has accepted the income during the course of the statement recorded at search. In respect of each of the issue the main contention of the ld. A.R are that it is not a case of any inquiry on the statements recorded during the course of search. The assessing officer has examined each and every document found and seized during the course of the search relating to the issues raised by the CIT and which has the bearing on the statements recorded from the assessee and after examining each of the points, he made the addition in respect of the some issues while he did not make any addition in respect of other issues. In respect of some issues, the assessee surrendered the un disclosed income in the return filed by him and therefore, the assessing officer did not make any addition after getting satisfied. In respect of point no. 3, 6 & 7 the assessing officer was duly satisfied that these income are duly covered by the disclosure made by the assessee in the return filed in response to the notice issued u/s 153A. The Ld. AR relied in this regard on certain decisions also and submitted that inadequacy of enquiry according to the whims and caprice of CIT does not give jurisdiction to the CIT to invoke section 263 and set aside the assessment. Now, the question before us is whether the assessing officer has examined each and every issue relating to the question which has been raised by the CIT in the show cause notice and after examining the same he has taken a conscious decision to make the addition to the extent, he found it to be justified or he did not make the addition as he is satisfied with the disclosure made by the assessee in the returns filed by him. Whether the income in respect of which the AO has not made any addition are duly supported by the disclosure made by the assessee in the return filed in pursuance to the notice issued u/s 153A.

18. The first issue raised by the CIT deals with the agreement dated 24.5.2008 entered into between with Shri Vinod Vaish and his family and assessee and his friends. The assessee in the statement recorded on 20.8.2008 stated that out of Rs. 5 crore, he had paid Rs. 50 lakhs. Balance was also invested by him in various names and thus Rs. 4.5 crores should have been taken his income while the assessing officer made erroneously an addition of Rs. 87,46,000/-. We noted from the assessment order dated 21.12.2010 that the assessing officer itself has noted that there had been search at the residential premises of the assessee and during the course of search various incriminating documents were found and seized . He has also summarised the details of the search and the survey operations from page 2 to 5 of the assessment order and accordingly issued the notice to the assessee u/s 153A and has supplied the copies of seized materials / documents / computer records along with the statements recorded u/s 132(4) to the assessee. The returns in response to notice u/s 153A were filed for all the impugned assessment years on 6.8.2010. Notices u/s 143(2) of the Income Tax was issued. Even the questionnaire dated 13.9.2010 along with the notice u/s 142(1) was issued. The hearing were adjourned and attended from time to time and ultimately assessment order was passed on 31.12.2010. The assessing officer at page 45 of the assessment order noted about the memorandum of agreement to purchase the land dated 24.5.2008 and noted that the total consideration was Rs. 5 crore and a sum of Rs. 49,18,335/- were incurred on registry and other charges. There were fifteen purchasers including the assessee. The assessing officer at page 46 of the assessment order noted that, the assessee in the statement recorded during search admitted entire amount of Rs. 5 crores be taken pertaining to him and he was ready to surrender the amount. Accordingly, the assessing officer issued questionnaire dated 13.9.2010 why this amount of Rs. 5 crore plus expenses should not be added in his income. The assessing officer also noted from the seized document that actually total payment of Rs. 14,24,60,600/- was paid towards the land on the basis of certain other paper seized during the course of the search relating to land dealing. The assessee submitted the reply about the purchase of land by 15persons. The reply submitted by the assessee has been reproduced in the assessment order at page 47 to 49 which consists of para no.11.1 to 11.6. After examining the reply of the assessee, the assessing officer made the addition on this account and on the basis of the various documents seized relating to land dealing and after examining the bank accounts of the other buyers also for Rs. 87,46,000/- in the hands of the assessee relating to the assessee‟s share in the land deal. He took this money has been incurred out side the books of account in land dealing on the basis of the documents seized. The finding of the assessing officer is very exhaustive appearing at page 49 to 1st para of page 59. We have gone through the finding of the assessing officer after going through the finding, it cannot be said that the assessing officer has not examined the issue relating to the addition of Rs. 4.5 crores as well as the documents and papers seized relating to land dealing income. The assessing officer we noted has applied his mind and examined all the seized papers pages 71 to 75 of LPS1/1. It is not a case where it can be said that the assessing officer has not examined the issue relating to the addition of Rs. 4.5 crores as well as land dealing. If the assessing officer has taken a concious view after appreciating the evidences, documents, papers found during the course of search, the order passed by the assessing officer in our opinion cannot become erroneous merely that it is not in accordance with the whims and fancies of the CIT or addition has not been made as the CIT feel appropriate. It is not the case of the revenue that the view taken by the assessing officer was unsustainable in law. This is also an undisputed fact that against this addition, the assessee went in appeal before the CIT(A) and CIT(A) has duly considered this issue in his order the copy of which is placed before us in the paper book. The order of the assessing officer to that extent got merged with the order of the CIT(A) and therefore the CIT in view the explanation (c) to section 263 does not have any jurisdiction to revise the assessment on this issue. Our aforesaid view is also supported by the following decisions of jurisdictional High court which are binding on us:

a) In the case of CIT Vs Shalimar Housing & Finance Ltd, 24 DTR 58 (M.P) has held as under :-

“On a perusal of cl. (c ) of Explanation to s. 263 it is vivid that the aforesaid section clearly stipulates that powers of the CIT shall extend to such matters as had not been considered and decided in appeal. The Tribunal has adverted to the factual position in a detailed manner and has appreciated those issues that have been taken up by the CIT while exercising jurisdiction under s. 263 and it has held that the said facets have already been dealt with by the CIT(A). Once the same has been dealt with, in exercise of appellate jurisdiction, the order cannot be regarded as incorrect and prejudicial to the interest of revenue on the basis of which the CIT can exercise jurisdiction under s. 263. The entire case hinges on facts and the tribunal has properly dealt with it and, therefore, no substantial question of law arises. – CIT vs. Max India Ltd. (2007) 213 CTR (SC) 266 : (2007) 295 ITR 282 (SC), Malabar Industrial Co. Ltd. Vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) and CIT vs. Associated Food Products (P) Ltd. (2006) 202 CTR (MP) 192 : (2006) 280 ITR 377 (MP) relied on.”

b) In the case of CIT Vs K.L. Rajput, 59 CTR 65 (M.P) (FB) 32, Taxman 326 has held as under :-

“The principles of merger has correctly been laid down in CIT vs. R.S. Banwarilal (1982) 28 CTR (MP) (FB) 49 : (1983) 140 ITR 3 (MP): TC57R.415 that the ITO‟s order merges with the appellate order of the AAC, only to the extent it was considered and decided by the AAC but the matters which are not covered by the appellate order of the AAC are left untouched and to that extent, the ITO‟s assessment order survives permitting exercise of revisional jurisdiction by the CIT under s. 263.- CIT vs. R.S. Banwarilal (1982) 28 CTR (MP) (FB) 49: (1983) 140 ITR 3 (MP) : TC57R.415 approved on this point)

19. The second issue relates to the failure of the assessing officer to make the addition of Rs. 4 crores on the basis of the statement 20.8.2008. This surrender was made in the statement dated 20.8.2008 on the basis on loose papers found relating to consultancy, money lending, real estate transaction as well as deposit made in the bank. We noted from the assessment order that the assessing officer has examined all the documents seized from the premises of the assessee and also found that in respect of the land deal on money of Rs. 8,75,42,265/- was paid outside the books of the accounts but ultimately he came to the conclusion that the share of the assessee was upto 1/10th and therefore 1/10th of the amount was sustained during the assessment year 2009-10. We also noted that in the return filed in response to the notice filed u/s 153A, the assessee has on account of the various seized papers surrendered following additional income :- A.Y. 2004-05 Rs. 6,50,000/-, A.Y. 2005-06 Rs. 6,05,572/-, A.Y. 2006-07 Rs. 6,96,745/-, A.Y. 2007-08 Rs. 8,35,595/-, A.Y. 2008-09 Rs. 18,00,000/- and A.Y. 2009-10 Rs. 4,13,05,005/-. The assessing officer after examining the statement of the assessee did not prefer to make the addition. The income has been surrendered by the assessee on the basis of the documents found and seized during the course of the search as is apparent from the computation statement of income on the basis of which the returns have been filed by the assessee in response to notices issued u/s 153A, the copy of which we pursued and placed before us in the paper book filed before us. On this basis it cannot be said that additions of Rs. 4 crores were not surrendered by the assessee. In fact, the assessee made the disclosure in all these years much more than Rs. 4 crores. Therefore on this issue also in our opinion the order passed by the assessing officer cannot be regarded to be erroneous and prejudicial to the interest of the revenue.

20. The third issue relates to the surrender of Rs. 1.1 crore in the statement recorded on 21.7.2008 on the basis of page 78 of LPS1/1. The assessing officer has examined the issue relating to the loan transactions in the name of the assessee and his wife totalling to Rs. 1.11 crores. The assessee no doubt had not shown this income in the return filed by him subsequent to the search even the assessing officer did not accept retraction of the assessee on this account at page 65 and therefore he examined this issue in detail from page 66 to 69 and ultimately came to the conclusion that to the extent of Rs. 70,00,000/- loan are non-genuine in the case of assessee and to the extent of Rs. 25,00,000/- are non-genuine in the hands of assessee‟s wife Mrs Neena Sharma out of the said sum of Rs. 1.11 crores and to that extent he has sustained the addition totalling to Rs. 95,00,000/- in the hands of assessee as well as his wife. We also noted the sum of Rs. 1.11 crores unsecured loan also include the sume of Rs. 10 lacs received from Shikhar builder as unsecured loans as per the details given and produced by the assessing officer in the assessment order. This is not a case where assessing officer has sustained only Rs. 70,00,000/- addition out of this sum of Rs. 1.1 crore this is apparently clear from the finding at page 69 of the order which are reproduced as under :-

“An addition of RS.70,00,000/- is being made in the hands of the assessee being non genuine unsecured loans appearing in the balance sheet of Shri Mukesh Sharma and Mrs Neena Sharma. Whereas an addition of Rs. 25,00,000/- will be made to the total income of Smt Neena Sharma on protective basis being non genuine unsecured loans appearing in her balance sheet as a part of the undisclosed income admitted by Shri Mukesh Sharma during the course of his statement recorded on 21.07.2008 u/s.132(4) of the I.T.Act has been shown as unsecured loan obtained by her.”

This itself prove that there is proper application of mind on the part of the assessing officer but CIT did not appreciated the fact properly and correctly and remained under the incorrect assumption as if addition of Rs. 25,00,000/- was not made. On this basis the order passed by the assessing officer cannot be regarded to be erroneous and pre-judicial to the interest of the revenue.

21. Fourth issue relates to the loan of Rs. 10 lacs taken from M/s Shikhar builders. We noted this issue has duly been discussed and examined by the assessing officer and after discussing, he came to the conclusion that this loan is genuine one. This is included within the sum of Rs. 1.11 lacs as mentioned in the preceding paragraph. The relevant finding and reference is at page 63 and 67 of the assessment order. This cannot be regarded to be a case where no enquiry has been conducted by the AO and thus there is no error in our opinion in the order of the assessing officer giving the jurisdiction to the CIT u/s 263 of the Income Tax Act. The Ld. DR even though vehemently supported the order of the CIT but could not convince us whether the view taken by AO is unsustainable in law.

22. Fifth issue relate to the payment made to sukhram in cash amounting to Rs. 3 lacs, sixth issue relate to Rs. 3 lacs found with assessee in cash and last issue relate to Rs. 4 lac given in cash by the assessee to his mother. We noted that the assessee has duly disclosed undisclosed income in the A.Y.2008-09 to the extent of Rs. 1800000/- in addition to the other undisclosed income in different assessment years, as enumerated by us in the preceding paragraphs and which we verified, the income so disclosed is sufficient to cover these declarations and in our opinion also there was no need to make further addition once the assessee has duly declared the income more than what he surrendered during the course of search in this regard. On the basis of this fact it cannot be said that the order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue. It is not the case of the revenue that the assessee has not surrendered additional income during the assessment year 2008-09.

23. In our opinion, the CIT cannot enter into the shoes of the A.O. If the A.O. has taken one of the views. Until and unless that view is unsustainable in law, the CIT cannot take action under section 263 holding the order passed by the A.O. to be erroneous. There is nothing on record how the explanation given by the assessee were not acceptable. The A.O. who has been empowered under section 143(3) r.w. 153A to frame the assessment and determine the taxable income of the assessee in accordance with the provisions of law. The powers under section 263, as has been pointed out by us earlier, can be invoked by the CIT if there is an error in the order of the A.O. and the order so passed is prejudicial to the interest of the Revenue. If the A.O. has duly considered the issue and has taken the view which may be in favour of the assessee that will not empower the CIT to invoke the provisions of section 263 of the Act until and unless that view is unsustainable in law or illegal? Coming to the contention of the ld. A.R. that it is not necessary by the A.O. to discuss in the order all the contentions by the assessee, we do agree with the ld. A.R. that there is no provisions in the Income-tax Act which provides that the A.O. should pass the Assessment Order in the manner so that all the queries raised by him as well as the submissions made by the assessee should be incorporated in the Assessment Order. In our opinion, where the A.O. do not agree with the Assessee, he should discuss the same in the Assessment Order so that the assessee should know the reasons thereof and file the appeal. In this case the A.O. after examining the issues, on some points preferred not to make the addition. Therefore, in our opinion, there is no error in the order of the A.O if he has not discussed the issue relating to each every income which is surrendered by the assessee in the return, in the Assessment Order. It is only the queries raised by the A.O. and the submissions made by the assessee will speak of whether the A.O. has applied his mind or not. We find that the Hon‟ble Bombay high Court in the case of CIT v Gabriel India Limited 203 ITR 108 has held in this regard as under:-

"Held, that the Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. This decision of the Income-tax Officer could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under section 263."

24. Similar view has been taken by the Hon‟ble Allahabad High Court in the case of CIT vs. Mahender Kumar Bansal, 297 ITR 0099 in which respectfully following the decision of Allahabad High Court in the case of CIT vs. Goyal Private Family Specific Trust, 171 ITR 698 (Alld.) has held under para no.12 as under :-

“As held by this Court in the case of Goyal Private Family Specific Trust (supra,) we are of the considered opinion that merely because the ITO had not written lengthy order, it would not establish that the Assessment Order passed under section 143(3)/148 of the Act is erroneous and prejudicial to the interest of the Revenue without bringing on record specific instances, which in the present case, the CIT has failed to do.”

25. A perusal of the order framed by CIT indicates that the Assessment Order passed by the A.O. was cancelled on the ground that the A.O. has not made the additions while making the assessment in respect of each and every income which has been surrendered by the assessee in the statement dated 21.7.2008 and 20.8.2008. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making Assessment Order, it is the satisfaction of the A.O. who made the enquiry and it should be a touchstone of the assessment order passed by him, the CIT cannot substitute his view in place of finding of the A.O. until and unless the view taken by the A.O. is unsustainable in law. No cogent material or evidence was brought to our knowledge by the ld. D.R. which may prove that the decision taken by the A.O. in the case of the assessee was unsustainable in law. The order passed by CIT is illegal without jurisdiction. The order passed by the CIT cannot be sustained if the order is sustained then this will permit the illegality to continue and the subsequent action carried out on the illegal order is also illegal per se. We have gone through the case laws cited by the ld. A.R. We find that the case of the assessee is duly covered by the decision of the Hon‟ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) wherein their lordships has held as under :-

"The pre-requisite to the exercise of jurisdiction by the Commissioner under section 263 is that the order of the AO is erroneous insofar as it is prejudicial to the interests of the revenue. The commissioner has to be satisfied of twin conditions, namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) is prejudicial to the interests of the revenue. If one of them is absent- if the order of the Assessing office is erroneous but is not prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the assessing officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of the order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, if the assessing officer has adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the assessing officer has taken one view with which the commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the assessing officer is unsustainable in law. Where a sum not earned by a person is assessed as income in his hands on his so offering the order passed by the assessing officer accepting the same without application of mind as such will be erroneous and prejudicial to the interest of the revenue."

26. In the case of CIT vs. R.K. Construction Co., Hon‟ble Gujarat High court 313 ITR 65 (Guj.) as confirmed by supreme court, confirming the order of the ITAT for which the undersigned was the author, has held as under:-

“The details of sub-contractors examined by the AO as per the directions of CIT in revision proceedings, inter alia, include the names of these sub-contractors, their permanent account numbers, their permanent addresses, amount given to them, name of work entrusted to them, nature of such work and statements recorded by the AO, etc. These details reveal that during the course of examination under s. 131, no question was put to many of these sub-contractors as to the variation in their signatures. Similarly, no question was put to them for the reasons of discounting with the Shroff. It is the stand of the assessee right from the beginning that all these sub-contractors were mainly working for the assessee and they did not have any office set up and since they were working for the assessee, they have used assessee‟s address for correspondence, especially with the Government for timely communication. These persons are eligible under s. 44AD to file their returns under presumptive scheme of taxation. All these persons were produced before the AO in revision proceedings and no question was put to them though their statements on oath were recorded. All these persons have confirmed in revision proceedings that the money was not returned by them to any person and was used for their personal benefit. The payments were made to these persons by banking channels and tax was deducted at source in accordance with law. The assessee has also given complete details with respect to labour expenses called for in assessment proceedings. These details were duly verified by the AO with the books and records. No adverse observation was made by the AO and hence, no addition was made in the regular assessment. The AO has also randomly selected two labourers and examined them and their statements were recorded under s. 131. Since all necessary details were furnished by the assessee, there was no reason for the CIT to invoke the revisional jurisdiction under s. 263. The CIT has not stopped merely by issuance of notice under s. 263. Once compliance is made, he went on issuing notice after notice and certain adverse inference were drawn by him from the details collected by him during the revisional proceedings. Those details were thoroughly checked and examined by the Tribunal and it arrived at a factual finding that there was no illegality committed by the assessee in entrusting the work to sub-contractors nor there was any illegality in making all due payments to them. The Tribunal has also given specific finding to the effect that there was no evidence on record that these contractors were related to the assessee or were associates or sister concerns of the assessee. The Tribunal has also given finding that the Revenue has not discharged the onus that the payments to sub-contractors were not genuine. Thus the Tribunal has come to the conclusion that no disallowances can be made merely on the basis of suspicion, howsoever strong may it be, and the suspicion cannot take the place of actuality. AO has taken a particular view on the basis of evidence produced before him. On the basis of the said material and materials which were collected by the CIT in revisional proceedings, the CIT has taken a different view. However, in the revisional proceedings under s. 263, it is not open for the CIT to take such a different view. No substantial questions of law arise out of the order of the Tribunal and hence, the appeal filed by the Revenue deserves to be dismissed. – CIT vs. Arvind Jewellers (2002) 177 CTR (Guj) 546 : (2003) 259 ITR 502 (Guj) and Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) relied on).”

The impugned case is duly covered by this decision also in our opinion.

27. Hon‟ble Supreme Court in the case of CIT vs. Max India Limited, 295 ITR 282 (SC) has held as under :-

“The phrase “prejudicial to the interests of the Revenue” in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression “erroneous” order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law.”

28. We noted that similar issue has arisen before the jurisdictional High court in CIT vs. Ratlam Coal Ash Co., 171 ITR 141 (MP), in which Hon”ble Madhya Pradesh High Court has held as under:-

 “It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in the return without making any enquiries in the circumstances of the case, the CIT would be justified in holding the order of the ITO to be erroneous. In the instant case, however, the Tribunal has found that the assessee had furnished all the requisite information and that the ITO, considering all the facts, had completed the assessment. The Tribunal further held that in the circumstances of the case, it could not be held that the ITO had made assessment without making proper enquiries. In view of these findings, the Tribunal was justified in law in reversing the order passed by the CIT.”

29. Under the similar facts In the case of CIT vs. Arvind Jewellers, 259 ITR 502 (Guj), Hon‟ble Gujrat High Court has held as under:-

“It is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanation in pursuance of the notices issued under s. 142(1) as well as s. 143(2) and after considering those materials and explanation, the ITO has come to a definite conclusion. The CIT did not agree with the conclusion reached by the ITO. Sec. 263 does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interest of the Revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that different view can be taken, should not be the basis for an action under s.263 and it cannot be held to be justified. Having regard to the facts and circumstances of the case, the Tribunal was justified in setting aside the order passed by the CIT under s. 263. – Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC) followed.

30. We have also gone through the decision of CIT vs. Vodafone Essar South Ltd. 212 Taxmann 184 (Del.) on which the ld . AR vehemently relied. In this decision, we noted that the Hon‟ble High Court relied on the earlier decision of the High Court in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 in which it was held that if there is some inquiry by the AO in the original proceedings, even if inadequate, that cannot clothe the Commissioner with jurisdiction u/s 263 merely because he can form another opinion. At the most the case of the assessee can be regarded to be the lack of inquiry in accordance with CIT if he has different opinion how to proceed with the assessment of the assessee.

31. Similar view has been taken by Hon‟ble Delhi High court in the case of CIT Vs Software Consultants 341 ITR 240 (Del.) in which it has held as under :-

“The assessee-company did not file its return of income for the assessment year 1993-94. During the course of assessment proceedings for the assessment year 1997-98, it was noticed that the central Bureau of Investigation had conducted search in the premises in which fixed deposit receipts worth Rs. 20 lakhs relating to assessment year 1993-94 were found in the possession of P, a director of the company. However, P claimed that the fixed deposits though in her name, actually belonged to the assessee. This stand was accepted by the Commissioner (Appeals) in the appeal filed by P. Thereafter, the Assessing Officer in the case of the assessee issued notice under section 148 of the income-tax Act, 1961. In response to this notice, the assessee filed a return showing loss of Rs. 1,02,756. By assessment order the Assessing officer accepted that the assessee had established and proved the source and its capacity to invest Rs. 20 lakhs and accordingly no addition was made on this account. In this assessment order the Assessing Officer had also noted that during the year share application money was increased by Rs. 47 lakhs. In order to verify the genuineness of share application money summonses under section 131 of the Act were issued to persons on random basis and their statements were recorded for confirming these investments made by them in the assessee-company. The Commissioner under section 263 of the Act directed the Assessing Officer to conduct further enquiries in respect of the share application money of Rs. 47 lakhs. He also held that the Assessing Officer had erred in determining the loss after issue of notice under section 148 of the Act. He mentioned lacunas and defects in the statements of the seven share applicants and the manner in which they were recorded. Accordingly, he held that the Assessing Officer had failed to make necessary verification and enquiries, which were required. The Tribunal quashed the order under section 263 of the Act passed by the Commissioner. On appeal: Held, dismissing the appeal, that the Tribunal had held that the order of the Assessing Officer could not be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition had been made on account of the reasons for reopening, which were recorded before issue of notice under section 148 of the Act. It had held that the Assessing Officer could not have made an addition on account of the share application money as no addition had been made on account of fixed deposits of Rs. 20 lakhs. The Tribunal had noticed and recorded that in the reasons for reopening it was mentioned that the assessee had made investment in the form of fixed deposits of Rs. 20 lakhs but in the assessment order passed under section 147/143(3) of the Act it had been held that the assessee had been able to show and establish the genuineness and capacity of the share applicants to make the investment. The Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under section 148 of the Act. This position was not disputed or disturbed by the Commissioner in his order under section 263 of the Act. The assessment order was not erroneous. Thus, the Commissioner could not have exercised jurisdiction under section 263 of the Act.”

32. In the case of CIT Vs Sunbeam Auto Ltd, 332 ITR 167 (Del.) High court has held that inadequacy of enquiry will not give the jurisdiction to CIT u/s 263. In this Hon‟ble High court has held as under :-

“The Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc. Whether there was application of mind before allowing the expenditure in question has to be seen. If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open.

An order cannot be termed erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, it cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualise a case of substitution of the judgement of the Commissioner for that of the Income-tax Officer who passed the order unless the decision is held to be erroneous. Where the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the 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 the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed.

The assessee was a manufacturer of car parts. Its return for the assessment year 2001-02 was taken up for scrutiny and assessment was completed. In revisional proceedings, the solitary objection of the Commissioner was that the expenditure on tools and dyes aggregating to Rs. 10 56,69,367/- was allowed as revenue expenditure without a detailed investigation. After considering all the materials furnished by the assessee the Commissioner took the view that the accounting practice followed by the assessee to debit the entire cost of tools and dyes in the year of installation was not correct and he remitted the case to the Assessing officer for re-examination. The Tribunal allowed the claim of the assessee. On appeal:

Held, dismissing the appeal, (i) that the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee. Such decision of the Assessing Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. The Assessing Officer had called for explanation on the very item from the assessee and the assessee had furnished its explanation. This fact was conceded by the Commissioner himself in his order. This showed that the Assessing Officer had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dyes and tools was to be treated as revenue expenditure or not. Therefore, it could not be said that it was a case of lack of inquiry. The accounting practice followed for a number of years had the approval of the income-tax authorities. Even for future assessment years, the very same accounting practice was accepted.

(ii) That the dyes were components of the machines. They needed constant replacement, as their life was not more than a year. The assessee also explained that since the parts were manufactures for the automobile industry, which had to work on complete accuracy at high speed for a longer period, replacement of the parts at short intervals become imperative to retain the accuracy. Neither with the replacement of tools and dyes to new asset comes into existence nor was their benefit of enduring nature. They did not even enhance the life of the existing machine of which the tools and dyes were only parts. Therefore, the view taken by the Assessing Officer was one of the possible views and the assessment order passed by him could not be held to be prejudicial to the interests of the revenue. The opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the Commissioner to vary that opinion and ask for fresh inquiry.”

33. So far the issue relating to unsecured loan is concerned the issue is duly covered by the decision in the case of CIT Vs Makal Suta Cotton Co. P. Ltd, 275 ITR 54 (M.P) in which jurisdictional High Court has held as under :-

“Held, dismissing the appeal, that the Tribunal found that the lender creditors were genuine, the transactions were genuine and the finance capacity / supplies were not open to doubt. In the circumstances, the mere fact that a search was conducted in the premises of the assessee-company and its directors on November 27, 2001, or that some documents were seized was not sufficient to disbelieve the clear and cogent evidence produced. The matter was purely one of fact and did not give rise to any substantial question of law. CIT v. Stellar Investment Ltd (1991) 192 ITR 287 (Delhi) and CIT v. Stellar Investment Ltd (2001) 251 ITR 263 (SC) referred to.”

34. In the case of CIT Vs Mehrotra Brothers, 270 ITR 157 (M.P) has held as under :-

“Held, dismissing the appeal, that the tribunal had found that when the assessee had furnished requisite information and the Income Tax Officer had considered the evidence filed and after his satisfaction about the genuineness of cash credits, the order of revision u/s 263 of the Income Tax Act, 1961, on the vague ground that the Assessing officer did not make proper enquiry was not valid. The Tribunal was justified in setting aside the order of revision. No substantial question of law arose from the order.”

The Supreme court has dismissed the special leave petition filed by the Department against this judgement.

In our opinion, the case of the assessee is also covered by this decision of the jurisdictional High court.

35. Similar view has been taken by jurisdictional High court in the case of CIT Vs Shri Govindram Seksariya Charity Trust,166 ITR 580 (M.P), in which it has held as under :-

“The assessee was a public charitable trust. For the assessment years 1973-74 and 1975-76 to 1977-78, the Commissioner of Income Tax found that the debtors of the assessee were persons to whom the provisions of section 13(3) of the Income Tax Act, 1961, were applicable and that the income of the assessee would be deemed to have been used for the benefit of those persons, as provided by section 13(2) of the Act. The Commissioner was of the view that the Income Tax Officer had allowed exemption under section 11 of the Act to the assessee without examining in detail the applicability of the provisions of section 13(1)(c)(ii) of the Act. Therefore, the Commissioner of Income Tax set aside the assessment orders and directed the Income Tax Officer to assess afresh. On appeal, the Tribunal set aside the order of the Commissioner. On a reference under section 256(2), the revenue contended that the assessment order did not disclose that the Income Tax Officer had examined the applicability of section 13(1)(c )(ii) : Held, that the Tribunal, after examining the record, found that to the audit objections that the assessee was not entitled to the benefit of exemption, by virtue of the provisions of section 13(1) of the Act, the Income Tax Officer had given detailed replied showing that the Income Tax Officer was alive to the relevant provisions of law and the facts before passing the orders of assessment. Since from the entire record, the Tribunal found that the Income Tax Officer was alive to the relevant facts and provisions of law before proceeding to frame the assessment, the Tribunal was right in setting aside the order of the Commissioner.

36. We noted Punjab and Haryana High court also in the case of Hari Iron Trading Co. Vs. CIT, 263 ITR 437 has taken the similar view when it has held as under :-

“Held, that, while framing the assessment under section 143(3), the fact that the assessee had not included the surrendered amount had been noticed by the Assessing Officer and was raised by him in the various notices issued to the assessee. The assessee had no control over the way the assessment order was drafted. The assessee had no control over the way the assessment order there was no discrepancy either in cash or in the stock. The Assessing Officer did not accept the assessee‟s explanation regarding cash and added Rs. 50,000, to its total income. However, the Assessing Officer accepted the explanation in respect of difference in stock that there were mistakes in the calculation of stock as per books inasmuch as stock worth Rs. 9,78,742 which had been received prior to the date of survey had not been taken into consideration while working out the stock as per books. The record also showed that the contention of the assessee was found to be correct on verification and, therefore, the Assessing Officer had accepted the contention of the assessee that surrender of Rs. 10 lakhs had been made due to a bona fide mistake in calculation of stock as per books and that in fact there was no discrepancy in stock. The Assessing Officer in the office note had explained as to why the addition of Rs. 10 lakhs was not being made. The record also showed that purchases from various parties had been verified as the Assessing Officer had placed on record certified copies from such parties. The Tribunal had based its findings entirely on the fact that there was no mention in the assessment order about the inquiries made by the Assessing Officer about the discrepancy in stock. This was not the correct approach as was evident from the provisions of section 263(1). In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, the action taken by him under section 263 could not be sustained. The letter by the Assessing Officer to the Commissioner supported the contention of the assessee that the case was being monitored by the Commissioner from time to time and the assessment order had been passed after a draft order along with survey file had been forwarded to the Commissioner for his approval. Both the appellate authorities had failed to take the trouble of even referring to the assessment record. Once the assessment order had been passed with the approval of the Commissioner, the successor – Commissioner could not possibly say that the matter had been decided without application of mind by the Assessing Officer. Thus, the findings of the Tribunal were liable to be reversed and the order of the Commissioner was liable to be set aside.”

37. We noted under the similar facts, in the case of CIT Vs Hari Singh & Associates, 267 CTR 442(Raj.) Hon‟ble Rajasthan High court has also taken a view in favour of the assessee when it has held as under :-

“Assessee having disclosed the impugned amount as advance towards sale of agriculture land, and the AO having treated the same to be part of business income, the order of AO could neither be treated as erroneous nor prejudicial to the interest of the revenue and, therefore, CIT was not justified in invoking his jurisdiction under s. 263 simply because he held as different opinion that addition ought to have been towards undisclosed income.”

38. In the case of CIT Vs Kohinoor Tobacco Products P. Ltd, 234 ITR 557 (MP) as relied on by Ld. DR, we noted that Hon‟ble High court has held as under :-

“It is an admitted position that it appears from the records that the income has been derived by way of rent and the AO was under an obligation to examine as to whether the income from letting out of the godowns and buildings is assessable under the head “income from house property‟ or otherwise. It appears that the same was not inquired into and no proper efforts were made to find out whether the income derived from letting out of godowns and buildings was assessable under the head “business income‟ of the assessee or not. Therefore, the view taken by the CIT is not erroneous and it should not have been interfered with by the Tribunal. The CIT has observed that it is a debatable issue and left the issue to be decided by the A.O. This was the correct approach because if the CIT had recorded that it is an income not arising out of the business then further inquiry by AO would have been influenced by that observation. The CIT has only observed that no proper enquiry has been made and left an enquiry be made by the AO after hearing the parties. This is the correct approach of the CIT and the view taken by the Tribunal in the present situation, does not appear to be justified.”

This decision in our opinion will not help the revenue as it relates to the case where no enquiry has been conducted by the assessing officer while in the case of the assessee due enquiry was conducted and other income as surrendered were duly returned by the assessee.

39. In the case of Bhagirath Aggarwal Vs CIT, 351 ITR 143 (Delhi) as relied by Ld. DR , we noted that Hon‟ble High court has held as under :-

“The assessee was insisting that it was for the department to corroborate the statement of admission made by him and until and unless the department corroborates the same, the statement cannot be relied upon. It was held that that is not the correct position of law. The admission once made can certainly be retracted, if the circumstances permit, and it can also be shown to have been made under some mistake or to be otherwise incorrect. But, the onus would be on the maker of that admission. In this case it was the assessee who had admitted and surrendered as his undisclosed income. It was incumbent upon him to show that he had made a mistake in making that admission and that the said admission was incorrect. He had access to all the documents which had been seized in as much as the copies had been supplied to him. However, he did not produce anything to establish that the admission was incorrect in any way. That being the position, the assessee could not revile from his earlier statement.

(Para 11)

It was held that the statements recorded u/s 132(4) were clearly relevant and admissible and they could be used as evidence. In fact, once there was a clear admission, voluntarily made, on the part of the assessee, that would constitute a good piece of evidence at the hands of the revenue. Although, the assessee had submitted that the retraction letter was not an afterthought it was not agreed with, the reason being that there was no mention of any documents in the retraction letter.”

In our view, this decision will also not applicable to the facts of the cases before us. This decision firstly relate to the merit. Secondly, it is not the case of the revenue that the statement recorded during the course of the search were not looked into by the assessing officer during the course of the assessment proceedings. The assessing officer has duly examined the statements given by the assessee as is apparent from the assessment order in the case of the assessee while completing the assessment.

40. In view of various decisions as discuss by us in the preceeding paragraphs and finding given by us, we are of the view that the CIT was not correct in law in exercising the jurisdiction u/s 263, and cancelling the assessment and accordingly we quash the order passed u/s 263.

41. In the result, the appeals filed by the assessee in all the years are allowed.

42. Order pronounced in accordance with Rule 34(4) by putting copy of the same on the notice Board on 31.10.2014.

 

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