$~10
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ 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
Counsel.
versus
HOTZ INDUSTRIES LTD. ..... Respondent
Through
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J. (ORAL)
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
not.
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
untenable.
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
conducted.
5. The appeal has no merit and the same is dismissed.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
JULY 23, 2014
NA/VKR
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