Sanjeev Malhotra ,, Lucknow vs Assessee

Sanjeev Malhotra v. CIT-2 Flat No.2, Nirmala Nagar Market Lucknow Nirala Nagar, Lucknow TAN/PAN:ADZPM9271D (Appellant) (Respondent)

Appellant by: Shri. Yogesh Agrawal, Advocate Respondent by: Shri. Amit Nigam, D.R. Date of hearing: 07 01 2015 Date of pronouncement: 20 02 2015

ORDER

PER SUNIL KUMAR YADAV:

This appeal is preferred by the assessee against the order of the ld. Commissioner of Income-tax passed under section 263 of the Income- tax Act, 1961 (hereinafter called in short "the Act"), inter alia, on the following grounds:-

1. BECAUSE the Ld. Commissioner ot Income Tax II, Lucknow has erred m law and on facts in holding that the assessment made by the ld. Assessing Officer on 24/12/2010 is erroneous in so far as it is prejudicial to the interest of revenue.

2. BECAUSE the Ed. Commissioner of Income lax II, Lucknow has erred m law and on facts and failed to appreciate that the Ed.

Assessing Officer had made the assessment alter proper and detailed enquires. In any case, if there were any minor lapses in the process of making the assessment, they had been fully clarified by the appellant before ld. CIT himself while complying to notice :-2-:

did 13/04/2012.

3. BECAUSE the Ed. CIT had no material, evidence or basis to hold that the assessment in question was either erroneous or prejudicial to the interest of revenue and therefore provision of section 263 applied to the case.

4. The order passed by the ld. CIT on 06/11/2012 is therefore illegal and against the facts of die case and deserves to be cancelled / set aside in its entirety.

2. The facts in brief borne out from the record are that on scrutiny of the assessment order and record, the ld. Commissioner of Income-tax has observed that a sum of Rs.27,75,722/- has been debited in the trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year" and this claim was allowed by the Assessing Officer without examining the details of the same. The ld. Commissioner of Income-tax further observed from the narration given in the books of account and also in view of the fact that an identical amount was reflected as receipt in the books of account for assessment year 2009- 10, that the provisions made in this year was in the nature of contingent liability and, therefore, could not have been allowed as deduction. Since the Assessing Officer has accepted the claim of the assessee without making any enquiry and without application of mind, the ld. Commissioner of Income-tax was of the view that the action of the Assessing Officer in allowing deduction is erroneous and prejudicial to the interest of the Revenue.

3. From the details of assets, the ld. Commissioner of Income-tax has observed that the assessee owned three properties but has not declared any income from the house property, although such income should have been computed as per provisions of section 22 read with section 23 of the :-3-:

Act. The Assessing Officer has accepted the income from house property to be Nil without any application of mind or making any enquiry, therefore, his order is also erroneous and prejudicial to the interest of the Revenue.

4. From the records, the ld. Commissioner of Income-tax has also observed that the assessee has made credit card payments of Rs.29,59,657/- and this amount has not been debited to the capital account. The assessee has debited the amount to the accounts of the business and was allowed as deduction by the Assessing Officer without calling for details of expenses and examining the liability of the same.

5. The ld. Commissioner of Income-tax further observed that the order of the Assessing Officer is both erroneous and prejudicial to the interest of the Revenue. He accordingly issued show cause notice to the assessee on these three points as to why the order of the Assessing Officer should not be set aside. In response thereto, the assessee has furnished detailed reply along with evidence before the ld. Commissioner of Income-tax, with the submission that the Assessing Officer has made enquiry or investigation on each and every points during the course of assessment proceedings, therefore, it cannot be said that the Assessing Officer has accepted the claim of the assessee without making any enquiry or application of mind. Therefore, the order of the Assessing Officer cannot be revised under section 263 of the Act. The ld. Commissioner of Income-tax re-examined the assessment order and record in the light of assessee's contentions, but was not convinced with it and he was of the view that since the Assessing Officer has not made proper enquiry on all the three issues, the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. He accordingly cancelled the assessment order and directed the Assessing Officer to pass a fresh assessment order as per law after giving the assessee an opportunity of being heard.

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6. Aggrieved, the assessee has preferred an appeal before the Tribunal with the submission that during the course of assessment proceedings, the Assessing Officer has applied his mind on all the three issues by making necessary enquiries. Being convinced with the explanations furnished by the assessee, the Assessing Officer has allowed the claim of the assessee, therefore, it cannot be said that the Assessing Officer has accepted the claim of the assessee without making any enquiry or application of mind.

7. With regard to the debit of Rs.27,75,722/- in the trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year", the ld. counsel for the assessee has invited our attention to the query letter dated 29.11.2010 appearing at page 427 of the compilation of the assessee and reply of the assessee dated 9.12.2010 appearing at pages 31 & 32 of the compilation of the assessee, with the submission that through the aforesaid query, the Assessing Officer has asked the assessee to furnish the details of the liability shown under the head "provisions to be made for expenses in current year" and also to explain the head-wise expenses. In response thereto, assessee has furnished detailed explanations vide letter dated 9.12.2010 explaining the provision for expenses under the liability side of the balance sheet at Rs.27,75,722/- as on 31.3.2008 as against Rs.42,74,368/- as on 31.3.2007 appearing in the trading account for the year ending on 31.3.2008. Having carefully examined the detailed reply in this regard, the Assessing Officer has accepted the claim of the assessee.

8. With regard to the details of immovable property, the relevant query was raised by the Assessing Officer vide query No.6 of the letter dated 3.9.2010 and this query was duly replied by the assessee and the Assessing Officer has properly examined the nature of properties and having convinced with the explanations of the assessee, the claim of the assessee was allowed. It was explained that property No.E-183, 3rd Floor, New :-5-:

Rajinder Nagar, New Delhi was wholly and exclusively used for the purpose of assessee's business and property No.C-202, Sterling apartments, 9, University Road, Lucknow was being used wholly for the purpose of assessee's residence and other property No.B/185, Nirala Nagar, Lucknow was inherited from his father who died in 2005 and it was in extremely dilapidated conditions and was raised to the ground. As on date, property is still under construction for residence and only a civil structure has been built and is not in habitable state. Therefore no A.L.V. on the aforesaid property was shown. Since the Assessing Officer has properly applied his mind to the explanations furnished by the assessee, his order cannot be set aside for the reason that the Assessing Officer has accepted the claim of the assessee without making necessary enquiry.

9. With regard the third issue i.e. credit card payment of Rs.29,09,657/, the ld. counsel for the assessee has invited our attention to the query letter dated 29.11.2010 and the order sheet proceedings dated 9.12.2010 and 202.12.2010, which are placed at pages 427, 428 and 429 of the compilation of the assessee. These queries were duly replied by the assessee vide reply dated 9.12.2010 appearing at pages 33 & 34 of the compilation of the assessee. It was duly explained that the payments were made through credit cards to purchase journals or books, tickets, etc., of which details were furnished before the Assessing Officer during the course of assessment proceedings. Being convinced with the details furnished by the assessee, the Assessing Officer has accepted the claim of payment of credit cards as business expenditure and allowed the same.

10. Therefore, it cannot be said that the Assessing Officer has allowed the claim of the assessee without making necessary enquiries. Since the order of the Assessing Officer was passed after due application of mind, the same cannot be revised under section 263 of the Act on the ground that :-6-:

the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue.

11. The ld. D.R., on the other hand, has submitted that the Assessing Officer has not made such enquiries as are required by a prudent Officer before accepting the claim of the assessee. Therefore, the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. The ld. D.R. has further contended that with regard to the income from house property, the assessee has not furnished any detail as is not borne out either from the order sheet or from any other reply filed by the assessee.

12. In rebuttal, the ld. counsel for the assessee submitted that the assessee has explained all the issues by placing relevant evidence and on merit also no addition on this account are sustainable in the eyes of law in the light of evidence furnished before the Tribunal.

13. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below and the documents placed before us, we find that undisputedly the Assessing Officer has not made any discussion on the aforesaid three issues, on which the ld. Commissioner of Income-tax sought to revise the order of the Assessing Officer under section 263 of the Act. But it does not mean that the Assessing Officer was not convinced with the claim of the assessee on its verification. It is settled position of law that the Assessing Officer is not required to record findings in the assessment order on all the issues, on which he is convinced with the explanations of the assessee. It is only to be seen whether there is an application of mind by the Assessing Officer on a particular issue before accepting the claim of the assessee and these facts can be seen from the enquiries conducted by the Assessing Officer during the course of assessment proceedings.

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14. From a careful perusal of record, we find that the Assessing Officer has raised queries through letters dated 3.9.2010 and 29.11.2010. In letter dated 3.9.2010, which is available at page 426 of the compilation of the assessee, the Assessing Officer has raised a query with regard to the details of moveable and immovable property and investment made during the year as query No.6. Similarly, through query letter dated 29.11.2010 appearing at page 427 of the compilation of the assessee, the Assessing Officer has raised a query vide query No.3 that under the liability side it is shown that "provisions to be made for expenses in current year". The Assessing Officer has asked the assessee to provide details of expenses explaining head-wise expenses. Vide order sheet entry dated 9.12.2010, the assessee was asked to furnish details of credit card payments. Vide order sheet dated 22.12.2010, a further query was raised with regard to the difference found in the City Bank credit card payments and details were sought.

These order sheet entries are appearing at pages 422 to 428 of the compilation of the assessee. Through these documents, it is clear that the Assessing Officer has made queries on all the three issues.

15. The assessee has filed reply dated 9.12.2010 in response to query letter dated 29.11.2010 appearing at pages 31 & 32 of the compilation of the assessee. Through this letter, the assessee has explained the provisions for expenses under the liability side of the balance sheet at Rs.27,75,727/- as on 31.3.2008 as against Rs.42,74,368/- as on 31.3.2007 appearing in the trading account for the year ending on 31.3.2008, with the submission that the assessee was subscription agents engaged in the business of subscribing foreign journals/magazines/periodicals for government libraries and research institutions of national repute, for which they have been granted permission by the Reserve Bank of India. It was further explained that subscription period of journals/magazines/periodicals is for the calendar year namely January to December. It was further :-8-:

explained that supplies of journals, etc. commence only after receipt of full payment in advance by the publishers and accordingly all the clients have to pay the full amount of subscription in advance. In order to complete supplies for the full calendar year (though payments are received and made initially) assessee is liable to incur expenses and incur completion of supplies for the period of full calendar year. Since the books of account are closed as on 31st March every year, assessee find it necessary to make a provision for the period April to December and appropriate on pro rata basis. It was further explained that in case of any missing or incomplete supply, assessee was bound to make good the loss to its clients, who are Government institutions. Therefore, through this reply, the assessee has explained the query raised by the Assessing Officer during the course of assessment proceedings. By furnishing the detailed reply and being convinced with the explanations of the assessee, the Assessing Officer has accepted the claim of the assessee.

16. Similarly, the details of credit card payments were also furnished before the Assessing Officer vide reply dated 9.12.2010 appearing at pages 33 & 34 of the compilation of the assessee.

17. With regard to the residential properties, details were sought by the Assessing Officer vide query letter dated 3.9.2010, but we do not find any reply available on record, on which it can be said that the assessee has furnished detailed explanations before the Assessing Officer during the course of assessment proceedings. In the light of the replies filed by the assessee, we are of the view that the Assessing Officer has applied his mind after making necessary enquiries on two issues - one is with regard to the debit entry of Rs.27,75,722/- in the trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year" and credit card payments of Rs.29,09,657/-. Therefore, it :-9-:

cannot be said that the Assessing Officer has accepted the claim of the assessee without making any enquiry.

18. The scope of enquiry has been examined by this Bench of the Tribunal in the case of M/s Pacific Leather Finishers, Kanpur vs. DCIT-3, Kanpur in I.T.A. No. 329/LKW/2014, dated 6.2.2015 and the Tribunal has taken a view that on account of insufficient enquiry, the assessment order cannot called to be erroneous and prejudicial to the interest of the Revenue. The relevant observations of the Tribunal in the aforesaid case are extracted hereunder for the sake of convenience:-

"14. The issue whether the assessment can be held to be erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry or insufficient enquiry was examined by the Tribunal in the case of Mehtab Alam vs. ACIT in I.T.A. Nos. 288 to 294/LKW/2014 in the light of various judicial pronouncements and the Tribunal has concluded that on account of insufficient enquiry, the assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue. The relevant observations of the Tribunal in this regard are extracted hereunder:-

22. So far as the legal position is concerned, it is settled position of law that the assessment order cannot be set aside or revised for inadequate enquiry by the ld.

Commissioner of Income-tax under section 263 of the Act.

23. In the case of Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (SC), it has been held by the Hon'ble Apex Court that the ld. Commissioner of Income-tax can invoke section 263 of the Act if the order of the Assessing Officer is erroneous and it is also prejudicial to the interest of the Revenue. Both the conditions must coexist. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of :-10-:

the Revenue. It was also held that if the claim of the assessee is accepted without making any enquiry by the Assessing Officer, the order of the Assessing Officer is certainly erroneous and exercise of jurisdiction by the ld. Commissioner of Income-tax under section 263 of the Act is justified.

24. In the case of CIT vs. Gabriel India Ltd., 203 ITR 108 (Bom)., the Hon'ble Bombay High Court reaffirmed the view that for invoking jurisdiction under section 263 of the Act, the order sought to be revised must be erroneous and also by virtue of it being erroneous prejudice has been caused to the interests of the Revenue.

25. Section 263 of the Act does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, unless the decision is held to be erroneous. The order is erroneous when it is not in accordance with law and is prejudicial when it has caused loss of the revenue. There must be material before the ld. Commissioner of Income-tax to satisfy himself prima facie that the two requisites are present.

Power cannot be exercised at the whims and caprice of the ld. Commissioner of Income-tax. In that case, the Income Tax Officer has made enquiries in regard to the nature of expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by letter in writing. All these are part of the record of the case. Such decision of the Income Tax Officer cannot be held to be erroneous simply because in his order he did not make any elaborate discussion in that regard. Therefore, the Hon'ble High Court has held that without finding the order of the Income Tax Officer as erroneous, the ld. Commissioner of Income-tax cannot :-11-:

set aside the same and direct the Income Tax Officer to re-examine the facts.

26. Again in the case of CIT vs. Max India Limited [2007] 295 ITR 282 (SC), their Lordships of the Hon'ble Apex Court have re-examined the scope of provisions of section 263 of the Act and has held that where two views are possible and the Income-tax 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 Income-tax Officer is unsustainable in law.

27. Similar view was again reiterated by the Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (Del) and their Lordships have observed that for inadequate enquiry, the order of the Assessing Officer cannot be held to be erroneous. Their Lordships have examined the difference between lack of proper enquiry and inadequate enquiry and have held that there is a distinction between "lack of enquiry" and "inadequate enquiry". 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 Act, merely because he has a different opinion in the matter. Such a course of action is open only in cases of "lack of inquiry". The contention of the Revenue that the Assessing Officer did not consider as to whether the expenditure in question was capital or Revenue expenditure cannot be accepted. Although apparently the assessment order does not give any reason while allowing the entire expenditure as revenue expenditure.

However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. The Assessing Officer is not required to give detailed reasons for each and every item of :-12-:

deduction in the assessment order. Therefore one has to see from the record as to whether there was an application of mind before allowing the expenditure in question as Revenue expenditure. Their Lordships further held that counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". 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 Act, 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.

28. In the case of Income Tax Officer vs. Dg. Housing Projects Ltd. (supra) their Lordships of the Hon'ble Delhi High Court again observed that in cases where there is inadequate enquiry but not lack of enquiry, again the ld. Commissioner of Income-tax must give and record a finding that the order of enquiry is erroneous. This can only happen if any enquiry or verification is conducted by the ld. Commissioner of Income-tax and he is able to establish and show error or mistake made by the Assessing Officer making the order unsustainable in law. The ld. Commissioner of Income-tax cannot direct the Assessing Officer to conduct further enquiry without recording a finding that the order of the Assessing Officer is erroneous.

29. Again in the case of CIT vs. Vikas Polymers (supra), their Lordships have held hat for invoking the jurisdiction under section 263 of the Act, both the twin conditions namely (1) the order of the Assessing Officer sought to be revised is erroneous; and (2) it is prejudicial to the interest of the Revenue, must coexist.

If one of them is absent i.e. if the order of the Income- tax Officer is erroneous but is not prejudicial to the :-13-:

revenue or if it is not erroneous but it is prejudicial to the revenue--recourse cannot be had to section 263(1) of the Act. It is a pre-requisite that the Commissioner must give reasons to justify the exercise of suo motu revisional powers by him to reopen a concluded assessment. A bare reiteration by him that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interest of the revenue, will not suffice. if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. In that case the assessee explained that the capital investment made by the partners, which had been called into question by the Commissioner, was duly reflected in the respective assessments of the partners who were income-tax assessees and the unsecured loan was duly reflected in the assessment order of the said creditor, which was also an assessee. Their Lordships in that case has held that provisions of section 263 of the Act have not been rightly invoked.

30. Again in the case of CIT vs. Ganpat Ram Bishnoi (supra), their Lordships of Hon'ble Rajasthan High Court have also expressed similar view by holding that record of the proceedings clearly shows that the Assessing Officer has framed assessment after due application of mind and holding enquiry into all areas, which according to the ld. Commissioner of Income-tax, have not been at all enquired into and the Assessing Officer has acted on mere furnishing evidence on one single date. The Tribunal noticed that as per the record of the proceedings, the Assessing Officer required the assessee :-14-:

to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000/- with evidence, confirmation of unsecured loans, amongst other matters, which the Assessing Officer desired to enquire into. The assessee has produced the desired information and the assessment was framed. The Hon'ble High Court held that the order passed by the ld. Commissioner of Income-tax under section 263 of the Act primarily on the basis that no enquiry was conducted, is not sustainable.

31. Besides other judgments were also referred by the assessee in this regard and we have also carefully examined the same and we find that similar views were expressed by various judicial authorities.

32. We have also examined the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Dr. Ashok Kumar (supra) on an issue whether the assessment order was passed with the approval of the Addl. CIT and their Lordships have held that the Assessing Officer was fully alive about the facts of the case and that is why he got necessary approval of the Addl. CIT before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue, then the ld. Commissioner of Income-

tax would not be justified in interfering in the approval according by the Addl. CIT for framing the assessment order and thus there was no case for setting aside the assessment order for the assessment years in question.

33. Though the assessee has also placed reliance upon the judgment of the Hon'ble jurisdictional High court in the case of Mohd. Ayub vs. Income Tax Officer (supra) in support of his contention that combined show :-15-:

cause notice for initiating action under section 263 of the Act cannot be issued and if issued, the order consequent thereto is not valid in law, but in this judgment the jurisdictional High Court has dealt with the issue of common notice issued for reopening of assessment under section 147 of the Act. Undisputedly notice under section 148 of the Act was issued to assume jurisdiction to reframe assessment after reopening of assessment. Therefore, the controversy involved in this case is not covered by this judgment. However, an analogy can be drawn in favour of the assessee, but on merit we find force in the contention of the assessee.

34. Turning to the facts of the case, we find that these assessments are framed under section 153A of the Act consequent to the search operation upon the assessees in which cash of Rs.2 crores were found. While framing the assessments, questionnaires were issued with regard to the availability of cash and source and the same were duly replied by the assessees. According to the assessees, this cash belongs to certain other parties/concerns in whose cases assessments were also framed under section 153C of the Act. Therefore, in the case of the assessees as well as in the case of other concerns, to which the cash relates, this issue was examined by the Assessing Officer. Under these circumstances, it cannot be said that the Assessing Officer has not applied his mind to the factum of seizure of cash during the course of search operation.

35. In the revisional order, the ld. Commissioner of Income-tax has made an observation that the Assessing Officer ought to have made certain more enquiries but he has not made out a case of lack of enquiry. At the most it can be a case of inadequate enquiry but for which assessment order cannot be set aside or revised :-16-:

under section 263 of the Act. From the aforesaid various judicial pronouncements, it is settled position of law that he ld. Commissioner of Income-tax cannot invoke jurisdiction under section 263 of the Act for setting aside the assessment order if he does not agree with the conclusion of the Assessing Officer on a particular issue. In the light of these facts, we are of the considered opinion that since the factum of seizure of cash during the course of search operation was duly examined by the Assessing Officer, invocation of provisions of section 263 of the Act for setting aside the assessment order is not valid and deserves to be quashed and we accordingly set aside the orders of the ld. Commissioner of Income-tax in all these cases passed under section 263 of the Act."

15. We have also examined the judgment referred to by the assessee in the case of CIT vs. Sunbeam Auto Ltd. (supra), in which their Lordships of the Hon'ble Delhi High Court has held that the decision of the Assessing Officer allowing the claim on being satisfied with the explanation of the assessee 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 showed that the Assessing Officer had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dies and tools was to be treated as revenue expenditure or not.

16. In the case of Income Tax Officer vs. Dg. Housing Projects Ltd. (supra), the Hon'ble Delhi High Court has held that a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order erroneous and prejudicial to the interests of the :-17-:

Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In the latter cases, the Commissioner has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.

17. In the case of Director of Income-tax vs. Jyoti Foundation (supra), the Hon'ble Delhi High court re-affirmed similar view. The relevant observations of the Hon'ble High Court is extracted hereunder:-

"Revisionary power under section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interests of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In CIT v. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi), it has been observed:

"The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the :-18-:

Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word 'erroneous' includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on the merits."

The Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), has observed as under:

'The reason is obvious. The position and function of the Income- tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong :-19-:

with the order if all the facts stated therein are assumed to be correct."

18. In the instant case, undisputedly the Assessing Officer has raised queries through questionnaire and in response thereto the assessee has filed reply furnishing complete details which were duly examined by the Assessing Officer before accepting the claim of the assessee. There is nothing on record to establish that the assessment order on this issue is erroneous and prejudicial to the interest of the Revenue on account of lack of enquiry. Therefore, we find no merit in the order of the ld. Commissioner of Income-tax in this regard, as the Assessing Officer has made enquiry on the issue of additional capital brought by the partners.

2. At the most, it can be said that there can be insufficient enquiry, but for that reason the assessment order cannot be held to be erroneous and prejudicial to the interest of the Revenue and the ld. Commissioner of Income-tax cannot set aside the same directing the Assessing Officer to make enquiry in a particular manner."

18. Therefore, in the light of the aforesaid various judicial pronouncements, we are of the view that the Assessing Officer has made a proper enquiry with regard to the debit entry of Rs.27,75,722/- in trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year" and credit card payments. Therefore, on these two issues, the assessment order cannot called to be erroneous and prejudicial to the interest of the Revenue. We accordingly set aside the order of the ld. Commissioner of Income-tax on these two issues.

19. So far as the issue of income from house property is concerned, we find that the Assessing Officer has made a general enquiry with regard to the details of moveable and immoveable properties and investment made therein, but we do not find any proper reply with regard to the immoveable :-20-:

properties and A.L.V. worked out thereon. Therefore, it cannot be said that the Assessing Officer has made an enquiry on this issue. Since the Assessing Officer has accepted the claim of the assessee on this issue without making any enquiry, we are of the view that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and we accordingly confirm the order of the ld. Commissioner of Income- tax in this regard.

20. Accordingly, the order of the ld. Commissioner of Income-tax is set aside on two issues (1) debit entry of Rs.27,75,722/- in the trading account for the year ending on 31.3.2008 under the head "provisions to be made for expenses in current year" and (2) credit card payments. But with regard to the third issue i.e. income from house property is concerned, the order of the ld. Commissioner of Income-tax is confirmed. The order of the ld. Commissioner of Income-tax is accordingly modified.

21. In the result, appeal of the assessee stands partly allowed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:20th February, 2015 JJ:0902 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar