# Commissioner of Income Tax, Meerut v. Vam Resorts &Hotels Pvt. Ltd

- **Citation:** (2019) 1 ILRA 458
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-08-20
- **Case number:** Income Tax Appeal No.107 of 2015
- **Bench:** Bharati Sapru, Rohit Ranjan Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/commissioner-of-income-tax-meerut-v-vam-resorts-hotels-pvt-ltd-44490
- **Pages:** 10

## Headnote

A. Section 263 Clause (c) to Explanation
1 of Income Tax Act, 1963 - Assessee
filed appeal against assessment order
u/s 143(3). CIT issued notice u/s 263
during pendency of appeal. Appeal partly
allowed
by
CIT(A).
Thereafter,
CIT
passed order under section 263 to set
aside the assessment order and remand
the
assessment
to
the
assessing
authority. Action under Section 263 was
barred by Clause (c) to Explanation 1 of
Section 263 of the Act.

B. Section 263 cannot be invoked on
mere suspicion.

Tribunal rightly set-aside order of CIT.
The appeal is devoid of merit. Dismissed.

The question of law answered against
the revenue and in favour of the
assessee.

CHRONOLOGICAL LIST OF CASES CITED: -

1: - 243 ITR 83 (SC), Malabar Industrial Co.
Ltd. vs. Commissioner of Income Tax,

2: - (2018)409 ITR 567 (Mad), Smt. Renuka
Philip vs. ITO

3: - (2015) 372 ITR 310 CIT vs.Krishna
Capbox Ltd, (2015) 372 ITR 310

4: - [2015] 372 ITR 303/230 Taxman 641/55
taxmann.xom
514
(Bom.)
CIT
v.
Fine
Jewellery (India) Ltd

5: - 323 ITR 83(SC), Commissioner of Income
Tax vs. Development Credit Bank Ltd.,

6: - 259 ITR 502 (Gujrat) CIT vs. Arvind
Jewellers

7: - 203 ITR 108 (Bombay) CIT vs. Gabriel
India Ltd.

8: - 111 ITR 326 (Alld), J.P.Srivastava & Sons
vs.
CIT
1 All. Commissioner of Income Tax, Meerut Vs. Vam Resorts & Hotels Pvt. Ltd.
459
9: - 224 ITR 180 (P & H), CIT vs. Ram Narain
Goel

10: - 262 ITR 295 (P & H), CIT vs.Faqir
Chaman Lal (E-7)

## Text

458 INDIAN LAW REPORTS ALLAHABAD SERIES
Dalpat, Ashish, Badri Vishal Pal and
Munna @ Surendra Pal Kewat are in jail,
shall serve out respective sentences
awarded to them by Trial Court by
impugned judgment and order as affirmed
by this Court.

69. Keeping in view provisions of
Section
437-A
Cr.P.C.,
appellants
Rameshwar, Jagmohan @ Munna Nishad
and Sukhpal are hereby directed to
forthwith furnish a personal bond of the
sum of Rs. 10,000/- each and two reliable
sureties, each of the like amount, before
Trial Court, which shall be effective for a
period of six months, along with an
undertaking that in the event of filing of
Special
Leave
Petition
against
this
judgment or for grant of leave, appellants
on receipt of notice thereof, shall appear
before Supreme Court.

70. A copy of this judgment be sent
to Trial Court by FAX for immediate
compliance. Lower Court's record be also
sent back along with a copy of this
judgment.
---------

APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.08.2019

BEFORE
THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

Income Tax Appeal No.107 of 2015

Commissioner of Income Tax, Meerut
 ..Appellant
Versus
Vam Resorts &Hotels Pvt. Ltd.
 ......Respondent

Counsel for the Appellant:
S.S.C., Sri Shubham Agarwal.
Counsel for the Respondent:
Sri Suyash Agarwal, Sri Krishna Agarwal.

A. Section 263 Clause (c) to Explanation
1 of Income Tax Act, 1963 - Assessee
filed appeal against assessment order
u/s 143(3). CIT issued notice u/s 263
during pendency of appeal. Appeal partly
allowed
by
CIT(A).
Thereafter,
CIT
passed order under section 263 to set
aside the assessment order and remand
the
assessment
to
the
assessing
authority. Action under Section 263 was
barred by Clause (c) to Explanation 1 of
Section 263 of the Act.

B. Section 263 cannot be invoked on
mere suspicion.

Tribunal rightly set-aside order of CIT.
The appeal is devoid of merit. Dismissed.

The question of law answered against
the revenue and in favour of the
assessee.

CHRONOLOGICAL LIST OF CASES CITED: -

1: - 243 ITR 83 (SC), Malabar Industrial Co.
Ltd. vs. Commissioner of Income Tax,

2: - (2018)409 ITR 567 (Mad), Smt. Renuka
Philip vs. ITO

3: - (2015) 372 ITR 310 CIT vs.Krishna
Capbox Ltd, (2015) 372 ITR 310

4: - [2015] 372 ITR 303/230 Taxman 641/55
taxmann.xom
514
(Bom.)
CIT
v.
Fine
Jewellery (India) Ltd

5: - 323 ITR 83(SC), Commissioner of Income
Tax vs. Development Credit Bank Ltd.,

6: - 259 ITR 502 (Gujrat) CIT vs. Arvind
Jewellers

7: - 203 ITR 108 (Bombay) CIT vs. Gabriel
India Ltd.

8: - 111 ITR 326 (Alld), J.P.Srivastava & Sons
vs.
CIT
1 All. Commissioner of Income Tax, Meerut Vs. Vam Resorts & Hotels Pvt. Ltd.
459
9: - 224 ITR 180 (P & H), CIT vs. Ram Narain
Goel

10: - 262 ITR 295 (P & H), CIT vs.Faqir
Chaman Lal (E-7)

(Delivered by Hon'ble Rohit Ranjan Agarwal J.)

1. This appeal under Section 260-A
of the Income Tax Act, 1961 (hereinafter
referred to as the Act) has been filed
assailing the judgment and order dated
14.11.2014 passed by the Income Tax
Appellate Tribunal, Delhi Bench "H",
New Delhi. This appeal was admitted on
16.2.2017 on the following questions of
law:

(1) Whether the ITAT passed a
perverse order in setting aside the order
U/s 263 on grounds that A.O. had already
conducted inquiry on issues on which
order U/s 263 was passed when no such
embargo has been put in the language of
the Section, the intention of the legislature
was never such so as to render the
revenue remediless against erroneous
orders of the A.O. nor make the revenue
suffer a continuous wrong.

(2) Whether the ITAT erred in
law in interpreting the provisions of
Section 263 which says "Commissioner
may call for and examine the records of
the proceedings if he considers any order
passed therein, by the A.O. is erroneous in
so far as prejudicial to the interest of
revenue" hence the view of the ITAT in
the present case that A.O. had already
conducted inquiry is unsustainable.

(3) Whether the ITAT erred in
law in curbing the power of the CIT
granted by the legislature to examine and
correct the orders of the A.O. especially
when this is the only remedy available
with the department to correct the wrong
of the A.O.

(4) Whether the ITAT erred in
law in deleting the order U/s 263 on the
issue of development expenses when it
was clear that only a small portion of such
development
expenses
was
actually
related to land development receipts.

(5) Whether the ITAT erred in
law in deleting the order U/s 263 on the
issue of agricultural income when it was
clear that assessee had only purchased a
land on which crops were shown and sale
proceeds of such crops does not constitute
agriculture income.

(6) Whether the ITAT erred in
law in allowing the appeal of the assessee
ignoring the fact that there was a
difference between the Gross Receipts as
per 26AS and Gross Receipts declared by
the assessee when the assessee did not
furnish any reconciliation statement to
explain the difference.

2. The case relates to the assessment
year 2008-09. The assessee which is a
Company, filed return of income on
27.9.2008
declaring
income
at
Rs.14,71,900/-. The said return was
processed under Section 143(1) of the
Act. The case of the Company was
selected for scrutiny and notices under
Section 143(2) and 142(1) were issued.
The assessee produced the books of
account and replied the various queries
raised by the Assessing Officer. As the
assessee
had
shown
development
expenses of Rs.7,16,62,142/- in the profit
and loss account, the A.O. found
Rs.1,20,000/- as excessive and disallowed
the same, and added to the income of the
assessee. The Order under Section 143(3)
460 INDIAN LAW REPORTS ALLAHABAD SERIES
of the Act was passed by the assessing
officer on 18.11.2010.

3. The assessee challenged the
assessment
order
passed
under
Section143(3) of the Act by filing Appeal
No.192/10-11 before the CIT(A) under
Section 250 of the Act. On 5.6.2013, the
CIT(A) allowed the appeal of the assessee
on the ground that addition made by A.O.
was without any basis, as the word
"appear" to be excessive was stated in the
order of the A.O. and such addition made
in a cavalier and casual manner cannot be
sustained.

4. During the pendency of the appeal
the Commissioner of Income Tax, Meerut
exercising power under Section 263 of the
Act, issued notice to the assessee. The
notice was replied by the assessee, and on
25.3.2013 Commissioner of Income Tax
directed the A.O. to look into applicability
of Section 40-A(3) and Section 40(a)(ia)
of the Act.

5. After the remand A.O. again
issued notice under Section 142(3)/263 of
the Act to the assessee. It appears that the
assessee did not appear before the
assessing authority and the assessing
officer
passed
assessment
order
on
7.3.2014 under Section 263/143(3) of the
Act on total income of Rs.17,47,323,650/-.

6. While the remand proceedings
were
pending
before
the
assessing
authority the assessee approached the
Income Tax Appellate Tribunal, (Delhi
Bench "H"), New Delhi (hereinafter
called as "ITAT") challenging the order
under Section 263 of the Act passed by
the
Commissioner
of
Income
Tax,
Meerut. The ITAT allowed the appeal of
the assessee setting aside the order passed
by the CIT, Meerut under Section 263 of
the Act.

7. Sri Subham Agarwal defending
the order passed by the Commissioner of
Income Tax, Meerut under Section 263 of
the Act submitted that the assessing
officer has disallowed the expenses of
Rs.1,20,000/- only, without any inquiry
and has accepted the restb of the amount
as land development expenses in the
profit and loss account, as such, the CIT
had rightly remanded the matter to the
assessing authority exercising revisional
power as the order of A.O. was erroneous
and pre-judicial to the interest of revenue.
He further submitted that after the remand
order, A.O. again has passed assessment
order on 7.3.2014 and now the addition of
Rs.7,16,62,142/- on account of land
development expenses had been made as
the assessee did not avail the opportunity
despite repeated reminders and failed to
produce the books of account and comply
the order of the assessing authority. He
contended that Tribunal has passed the
order impugned after assessment order
has been passed by the assessing authority
after remand, and Tribunal should not
have set aside the same, but should have
relegated the matter to assessing authority
directing the assessee to appear before the
same and produce books of account to
verify the queries so raised.

8. Per contra, counsel for the
assessee submitted that the assessment
order dated 18.11.2010 was passed after
notice under Sections 143(2) and 142(1)
of the Act was issued to assessee raising
various queries and the assessee had
appeared before the Assessing Officer
number of times and furnished books of
account and replied. Further, the CIT in
its show cause notice dated 6.2.2013 has
1 All. Commissioner of Income Tax, Meerut Vs. Vam Resorts & Hotels Pvt. Ltd.
461
accepted the fact that on examination of
record, assessment order was passed after
inquiry which according to him was not
proper. Thus, proceedings under Section
263 of the Act cannot be invoked by the
CIT when there is no material to hold that
order was erroneous and pre-judicial to
the interest of revenue and it would not be
invoked to correct each and every type of
mistake and error committed by A.O. He
further relied upon paragraph nos.7 and 9
of judgment of the Apex Court in the case
of Malabar Industrial Co. Ltd. vs.
Commissioner of Income Tax, 243 ITR
83 (SC), which are extracted hereunder:

"7. 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.

9. The phrase 'prejudicial to the
interests 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 an
order of Assessing Officer cannot be
treated as prejudicial to the interests of
the revenue, for example, when an ITO
adopted one of the courses permissible
in law and it has resulted in loss of
revenue; or where two views are
possible and the ITO 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 ITO is unsustainable in
law."

9. The second limb of argument of
counsel for the assessee is that appeal
before the CIT(A) was pending, as such,
the CIT has no jurisdiction to revise the
order,
in
view
of
Clause
(c)
of
Explanation-1 to Section 263 of the Act,
which provides that when appeal is
pending before the Commissioner, the
exercise of jurisdiction under Section 263
of the Act is barred. He relied upon the
judgment in the case of Smt. Renuka
Philip vs. ITO (2018)409 ITR 567
(Mad), the relevant paragraphs of which
are extracted hereunder:

"21. With regard to the merits of
the case, the learned counsel for the assessee
referred to a decision of the Division Bench of
this Court in Dr.P.K.Vasanthi Rangarajan
v. CIT [2012] 23 taxmann.com 299/209
Taxman 628 (Mad.), wherein, the Hon'ble
Division Bench held that there is no inhibition
in the assessee claiming the benefit of
investment made in four flats thereby gaining
the benefit under Section 54F of the Act. The
Court took note of the decision in TCA No.
656 of 2005 dated 04.01.2012. However, we
are not examining the merits of the matter at
this juncture since, we are only called upon to
answer the Substantial Question of Law with
regard to the assumption of jurisdiction of the
Commissioner under Section 263 of the Act.
The power under Section 263 of the Act is not
exercisable under certain circumstances. In
this regard, we refer to Section 263(1)
explanation 1(c), which reads as follows:

"Revision of orders prejudicial
to revenue

263(1)...

(a) to (b)
462 INDIAN LAW REPORTS ALLAHABAD SERIES

(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."

22. The above explanation makes it
clear that when the appeal is pending before
the Commissioner, the exercise of jurisdiction
under Section 263 of the Act is barred. The
Commissioner in the order dated 14.03.2012
states that the appeal pertains to the claim
made by the assessee under Section 54 of the
Act and it has got nothing to do with the order
passed by the Assessing Officer under Section
54F of the Act. The said finding rendered by
the Commissioner is wholly unsustainable,
since the assessee went on appeal against the
re-assessment order dated 31.12.2009 stating
that his claim for deduction under Section 54
of the Act should be accepted."

10. It has also been contended that
remand by the CIT as far as the non-deduction
of TDS is concerned, was wrong, as payment
was made by the Company, i.e., ERA Landmark Ltd., and as per Section 194(c) of the
Act the TDS was deducted.

11. It was further submitted that all
the documents in evidence as proofs and
the queries so raised by the assessing
officer was submitted and replied by the
assessee and the CIT wrongly invoked the
jurisdiction under Section 263. Reliance
has been placed upon the decision of this
Court in the case of CIT vs. Krishna
Capbox Ltd, (2015) 372 ITR 310,
relevant
paragraphs
of
which
are
extracted hereunder:

9.
The
Tribunal
further
considered
the
question
whether
discussion of queries and reply received
from assessee, in assessment order, is
necessary or not. Relying on two
judgments of Delhi High Court in CIT Vs.
Vikash Polymers [2012] 341 ITR 537/
[2010] 194 Taxman 57 and CIT v.
Vodafone Essar South Ltd. [2012] 28
taxmann.com 273/ [2013] 212 Taxman
184 (Delhi), it held that once inquiry was
made, a mere non discussion or non-
mention thereof in assessment order
cannot lead to assumption that Assessing
Officer did not apply his mind or that he
has not made inquiry on the subject and
this would not justify interference by
Commissioner by issuing notice under
Section 263 of the Act.

10. In Vikash Polymers (supra)
relevant part of the observations in this
regard read as under (page 548 of 341
ITR):

"This is for the reason that if a
query was 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 was reflected
in the assessment order, that would not, by
itself, lead to the conclusion that the order of
the Assessing Officer called for interference
and revision."

11.
Further,
the
relevant
observation made in Vodafone Essar
South Ltd. (supra) in this regard reads as
under (page 531 of 1 ITR-OL):

"The lack of any discussion on
this cannot lead to the assumption that the
Assessing Officer did not apply his mind."

12.
Learned
counsel
for
the
Department could not place any other
1 All. Commissioner of Income Tax, Meerut Vs. Vam Resorts & Hotels Pvt. Ltd.
463
authority before this Court wherein any
otherwise view has been taken. On the
contrary, learned counsel for assessee has
placed before us a decision of Bombay
High Court in Income Tax Appeal
No.296 of 2013 (CIT v. Fine Jewellery
(India) Ltd.) [2015] 372 ITR 303/230
Taxman
641/55
taxmann.xom
514
(Bom.) decided on February 3, 2015,
wherein
also
Bombay
High
Court,
following its earlier decision in Idea
Cellular Ltd. Vs. Dy. CIT [2008] 301 ITR
407 (Bom.) has taken a similar view and
said as under (page 307 of 372 ITR):

"......if a query is raised during
assessment proceedings and responded to
by the assessee, the mere fact that it is not
dealt with in the Assessment Order would
not lead to a conclusion that no mind had
been applied to it."

12. Similarly in the case of CIT vs.
Mahendra Kumar Bansal, 2008(297)ITR
99 (Alld), this Court held that merely
because the income tax officer 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 pre-judicial to the interest
of the revenue. Relevant paragraph of
which is extracted hereunder:-

"In the case of Goyal Private
Family Specific Trust [1988] 171 ITR
698, this court has held that the order of
the Income-tax Officer may be brief and
cryptic, but that by itself is not sufficient
reason to brand the assessment order as
erroneous and prejudicial to the interests
of the Revenue and it was for the
Commissioner to point out as to what
error was committed by the Income-tax
Officer
in
having
reached
to
its
conclusion and in the absence of which
proceedings under Section 263 of the Act
is not warranted.

In the case of Belal Nisa [1988]
171 ITR 643 the Patna High Court has
held that where the Income-tax Officer
had not carried out the necessary enquiry
enjoined by section 143(1) of the Act the
Commissioner is within his power in
taking action in terms of Section 263(1)
of the Act. Similar view has been taken in
by the Patna High Court in the case of
Smt. Kaushalya Devi [1988] 171 ITR
686.

The principle laid down by the
Patna High Court in the aforesaid two
cases are not applicable to the facts of the
present case in view of the provisions of
Section 143(1) of the Act and as the
Central Board of Direct Taxes had already
issued the circular referred to above that
action under Section 263 of the Act is not
warranted and this circular appears to
have not been brought to the notice of the
Patna High Court which is binding upon
the departmental authorities.

As held by this Court in the case
of Goyal Private Family Specific Trust
[1988] 171 ITR 698, we are of the
considered opinion that merely because
the Income- tax Officer 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 interests of the Revenue
without bringing on record specific
instances, which in the present case, the
Commissioner of Income Tax has failed
to do."

13. Lastly, the counsel for the
assessee submitted that the argument of
counsel for the Department relying upon
464 INDIAN LAW REPORTS ALLAHABAD SERIES
fresh assessment order made by the
assessing
officer
under
Section
263/143(3) of the Act dated 7.3.2004 for
the purpose of Section 263 of the Act is
not sustainable, as according to him
definition of expression "record" as per
Clause (b) of Explanation to Section 263
of the Act includes all the records relating
to Section 263 proceedings available at
the time of examination by the CIT only,
and not in subsequent order or fresh order
passed
thereafter
under
Section
263/143(3) of the Act, which could justify
the proceedings under Section 263 carried
out by the CIT.

14. We heard Sri Shubham Agarwal,
learned counsel for the Department, Sri Suyash
Agarwal, learned counsel for the respondentassessee and have perused the record.

15. The revenue in this appeal has
tried to establish that ITAT was not
correct in setting aside the order passed
by the Commissioner under Section 263
of the Act, on the ground, that assessee
had not furnished entire details regarding
the contracts, which was cancelled and
also the A.O. not looking into the
provisions of Section 40(a)(i-a) of the Act
whereby such expenses on which the
T.D.S. was liable to be deducted, but was
not actually deducted were required to be
disallowed and added back under the said
provisions of the Act.

16. On the other hand, the contention of
assessee that the A.O. after considering the
entire books of account and the reply
furnished by the assessee passed the
assessment order under Section 143(3) of the
Act. Further, from perusal of the assessment
order dated 18.11.2010, it is clear that the
A.O. had considered all the books of account
and further on 13.5.2010 it had required the
assessee, the entire information for the
relevant assessment years along with copy of
bank statement, narration of debit and credit
entries, and other details.

17. On 7.7.2010, the assessee had
replied the said notice and made available
all the documents as required by the A.O.
The Tribunal being the last fact finding
Court, in paragraph 7 of its judgment, had
noted that details of the documents
produced before the A.O. included
computation of income along with return
and details of TDS, copy of balance sheet,
trading and profit and loss account, details
of sundry debtors as well as copies of the
orders issued by the debtors to the
assessee.

18. Thus, the case in hand is not a case
where the CIT found that the assessment order
was erroneous and it is prejudicial to the
interest of the revenue, as the A.O. after the
case of the assessee was selected in scrutiny
had required the assessee to furnish all the
documents and only after the production of
the said documents and his satisfaction the
assessment order was passed under Section
143(3) of the Act. The Apex Court in the case
of Malabar Industrial Co. Ltd. (supra)
while considering the pre-requisite for
exercising power by the Commissioner under
Section 263 of the Act, held as under:

"A bare reading of Section 263 of
the Income Tax Act, 1961 makes it clear that
the prerequisite for the exercise of jurisdiction
by the Commissioner suo moto under it, is
that the order of the Income-tax Officer 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) it is
prejudicial to the interests of the revenue. If
1 All. Commissioner of Income Tax, Meerut Vs. Vam Resorts & Hotels Pvt. Ltd.
465
one of them is absent - if the order of the
Income-tax Officer 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) of
the Act. 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."

19. Similar view has been taken by
the Bombay High Court in the case of
Commissioner of Income Tax vs.
Development Credit Bank Ltd., 323
ITR 83(SC), relevant paragraph of the
same is extracted below:

"Held, dismissing the appeal,
that there was no basis or justification for
the
Commissioner
to
invoke
the
provisions of Section 263. The Assessing
Officer after making an enquiry and
eliciting a response from the assessee
came to the conclusion that the assessee
was entitled to depreciation on the value
of securities held on the trading account.
The Commissioner could not have treated
this findings to be erroneous or to be
prejudicial to the interests of the Revenue.
The observation of the Commissioner that
the Assessing Officer had arrived at a
finding without conducting an enquiry
was erroneous, since an enquiry was
specifically held with reference to which a
disclosure of details was called for by the
Assessing Officer and furnished by the
Assessing Officer and furnished by the
assessee. The Tribunal was justified in
holding that recourse to the powers under
Section 263 was not warranted in the facts
and circumstances of the case."

20. In the case of CIT vs. Arvind
Jewellers, 259 ITR 502 (Gujrat), it was
held that once the A.O. after issuing
notice had considered all the material on
record, there was no basis for invocation
of jurisdiction under Section 263 of the
Act. Relevant paragraph of the said
judgment is extracted hereunder:

''Held, that the finding of fact by
the Tribunal was that the assessee had
produced relevant material and offered
explanation in pursuance of the notices
issued under Section 142(1) as well as
section143(2) of the Act and after
considering the material and explanations,
the Income-tax Officer had come to a
definite conclusion. Since the material
was there on record and the said material
was considered by the Income-tax Officer
and a particular view was taken, the mere
fact that different view can be taken
should not be the basis for an action under
Section 263. The order of revision was
not justified."

21. The Bombay High Court in the
case of CIT vs. Gabriel India Ltd., 203
ITR 108 (Bombay), held that the order of
the A.O. would not become erroneous
simply because he did not make elaborate
discussion. The relevant paragraph of the
said judgment is extracted hereunder:

"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 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
466 INDIAN LAW REPORTS ALLAHABAD SERIES
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."

22. The Division Bench of this
Court in the case of J.P.Srivastava &
Sons vs. CIT, 111 ITR 326 (Alld) had
taken a similar view. The relevant
paragraph is extracted hereunder:

"We are of opinion that the
approach of the Commissioner is erroneous.
The failure of the Income-tax Officer to deal
with the claim of the assessee in the
assessment order may be an error, but an
erroneous order by itself is not enough to
give jurisdiction to the Commissioner to
revise it under Section 33B. It must further
be shown that the order was prejudicial to the
interests of the revenue. It is not each and
every order passed by the Income-tax Officer
which can be revised under Section 33B.

Section 33B contemplates a notice
to the assessee. In response to the notice the
assessee may show to the Commissioner that
the order sought to be revised is not
prejudicial to the interests of the revenue. In
that event, the Commissioner would have no
jurisdiction to take any further action. He
would be competent to take action only if he
rejects the plea of the assessee. It thus
becomes necessary for the Commissioner to
examine the merits of the objection raised by
the assessee. He cannot delegate that power
to the Income-tax Officer by setting aside the
assessment order and directing him to make
a fresh assessment after taking into
consideration the objection of the assessee."

23. In the present case, the Tribunal
rightly arrived at the finding that all the
material in regard to land development
expenses was before the Assessing Officer
who had required the assessee to produce all
the documents in relation to the same and
after inquiring about the details of contract
and the contract executed by assessee, the
bill submitted and payment schedule made,
the Assessing Officer accepted the books of
account and only disallowed Rs.1,20,000/-
and added to the income of the assessee,
which was also set aside by order of the
CIT(A) while exercising the power under
Section 263 of the Act CIT did not have any
material for invoking the said provision and
it merely did the same on suspicion and
presumption. The Punjab and Haryana High
Court in the case of CIT vs. Ram Narain
Goel, 224 ITR 180 (P & H) held that
suspicion however drawn cannot take place
on evidence or proof. This case was followed
in the case of CIT vs. Faqir Chaman Lal,
262 ITR 295 (P & H).

24. The argument raised by counsel
for the revenue that the Tribunal should
have send back the matter to the assessing
authority to decide afresh is a fallacy, as
the CIT itself on 5.6.2013, while deciding
the appeal of the assessee under Section
250 of the Act set aside the assessment
order dated 18.11.2010 to the extent of
addition of Rs.1,20,000/- made in the
assessment proceedings. Further, the
appeal before the Tribunal emanated from
the order of the Commissioner of Income
Tax exercising power under Section 263
of the Act, as such the Tribunal was
correct in limiting its scope to decide
whether the exercise of power made by
the Commissioner was in consonance
1 All. M/S S.D. Traders Vs. Commissioner of Income Tax, Kanpur & Anr.
467
with provision of Section 263 and relied
upon the decision of Malabar Industrial
Co. Ltd. (supra).

25. As, Clause (c) of Explanation 1
to Section 263 of the Act provides that
when an appeal is pending before the
Commissioner, the exercise of jurisdiction
under Section 263 of the Act by CIT is
barred. Thus, in the present case, the CIT
wrongly exercised jurisdiction under
Section 263 of the Act by remanding back
the matter to assessing authority on
25.3.2013, while the appeal was decided
by CIT (A) on 5.6.2013. Thus, the order
passed by the ITAT does not suffer from
any irregularity and needs no interference.

26. As far as the word "record"
appearing in Clause (b) of Explanation1 to Section 263 is concerned, it means
the record available at the time of
examination by the Commissioner of
Income Tax and not any material or
record available subsequent to his
examination or exercise of power under
Section 263. Thus, any order passed by
the AO in the assessment proceedings
after the remand by the CIT cannot be
looked upon and the argument made by
the counsel for the revenue for relying
upon the fresh assessment order made
on 7.3.2004 under Section 263/143(3) of
the Act cannot be accepted in view of
the above provision of law.

27. In the present case, the Tribunal
had recorded specific finding of fact that the
assessing authority had examined each and
every aspect of the case on which the remand
order hinges, as such the remand order was
not sustainable in the eyes of law.

28. Considering the facts and
circumstances of the case, we are of the
considered opinion, that the revenue has
failed to make any case for interference in
the order of the ITAT, as the CIT had
proceeded to remand the matter back to
the assessing authority while the appeal of
the assessee was pending under Section
250 and the power of exercise under
Section 263 was barred by Clause (c) to
Explanation 1 of Section 263 of the Act.
Further, the remand order by the CIT was
based
merely
on
suspicion
and
presumption.

29. The appeal is devoid of merit
and is hereby dismissed. The question of
law is, therefore, answered against the
revenue and in favour of the assessee.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 03.09.2019

BEFORE
THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

INCOME TAX APPEAL No.159 of 2016

M/S S.D. Traders ...Appellant
Versus
Commissioner of Income Tax,Kanpur
&Anr....Respondents

Counsel for the Appellant:
Sri Suyash Agarwal.

Counsel for the Respondents:
C.S.C., I.T., Sri Krishna Agarwal, Sri
Pravin Kumar.

A. Income Tax Act, 1961: Sections 44AB,
142(1), 143(1), 149(1)(b), 251, 260-A
Power of Commissioner (Appeals) -
coterminous with that of ITO - can also
direct AO to do what he had failed to do.

Income Tax Appellate Tribunal, affirmed the
addition of sundry creditors to the extent of