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July, 29th 2014

+                         ITA 294/2014

                                      Date of decision: 23rd July, 2014

      COMMISSIONER OF INCOME TAX-IV             ..... Appellant
              Through     Mr. Kamal Sawhney, Sr. Standing
              Counsel with Mr. Sanjay Kumar, Jr. Standing


      HOTZ INDUSTRIES LTD.                             ..... Respondent



      Having heard learned counsel for the Revenue in this appeal

against the order of the tribunal dated 25th October, 2013, quashing the

order under Section 263 of the Income Tax Act, 1961 (Act, for short)

passed by the Commissioner, we are not inclined to interfere. We

need not examine the issue whether the Commissioner was precluded

from passing an order under Section 263 because disallowance under

Section 14A made in the order under Section 143(3) was subject

matter of first appeal as we have to hold that the order passed by the

Commissioner under Section 263 of the Act dated 31st October, 2011,

did not meet the two jurisdictional pre-conditions i.e., the assessment
order was erroneous and prejudicial to the interest of the Revenue.

2.     The Assessing Officer had made disallowance under Section

14A of Rs.45,07,413/-.      The Commissioner felt that the correct

disallowance should have been Rs.1,25,39,364/-. This was disputed

by the assessee pointing out that the figures taken by the

Commissioner were incorrect.       Without pronouncing whether the

figures given by the assessee were incorrect, the Commissioner

recorded that this required verification from the records and, therefore,

the assessment order to this extent should be set aside for fresh

examination.    This is impermissible and cannot be allowed under

Section 263 as the Commissioner must reach the finding that the

assessment order restricting disallowance under Section 14A to

Rs.45,07,413/- was erroneous and incorrect. The Commissioner on

the other hand was uncertain and undecided, whether he was correct or


3.     The second issue related to loans/assets written off to the tune

of Rs.6,25,245/-. The assessee was a non-banking financial company

dealing in investments etc. The assessee in response to the notice had

submitted that the deduction as claimed was examined by the

Assessing Officer and he was satisfied with the claim made and the

same was admissible under Section 36(1)(vii) of the Act.

Commissioner in the order under Section 263 did not go into the said
question on merits, but observed that the "Assessing Officer it

appears" had not caused any inquiries or investigation, but accepted

the contention of the assessee. Commissioner observed, "therefore,

meaningful inquiry should be conducted". This does not meet the

requirement that the decision of the Assessing Officer should be

erroneous. Once inquiries were conducted and a decision was reached

by the Assessing Officer, it cannot be said that it was a case of no

inquiry. In such cases, the Commissioner must reach a finding that the

finding of the Assessing Officer was erroneous, not because no

inquiries were conducted, but because the final finding was wrong and


4.    The third issue relates to sale of agricultural land. The assessee

had claimed exemption under Section 54B of the Act, which the

assessee was not entitled to as a company. During the course of

assessment proceedings, the assessee had accepted that Section 54B

was not applicable, but pleaded that they had sold the agricultural

land, which was exempt under Section 2(14) clause (iii) read with

Section 45(1) of the Act.      The assessee had submitted that the

Assessing Officer had examined whether the land sold was

agricultural land and details were filed.        The finding of the

Commissioner was not that the Assessing Officer had not made any

inquiries, but that the Assessing Officer had not properly applied his
mind and deliberated upon the issue. This again does not meet the

statutory requirement that the order passed by the Assessing Officer

was erroneous. Once inquiries were held and the Assessing Officer

formed a belief, the finding/opinion formed can be set aside only when

it is erroneous and not because no inquires or inadequate inquires were


5.    The appeal has no merit and the same is dismissed.

                                      SANJIV KHANNA, J.

                                      V. KAMESWAR RAO, J.
      JULY 23, 2014
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