IN THE HIGH COURT OF DELHI AT NEW DELHI
.
.
.
ITA 409/2013
.
.
.
CIT ..... Appellant
.
Through Mr. Kamal Sawhney, Sr. Standing Counsel.
.
.
.
versus
.
.
.
GALILEO INDIA PVT LTD. ..... Respondent
.
Through
.
.
.
CORAM:
.
HON'BLE MR. JUSTICE SANJIV KHANNA
.
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
.
.
.
O R D E R
.
13.09.2013
.
.
.
ITA 409/2013 and C.M.No.12624/2013
.
.
.
There is delay of 212 days in refiling of the appeal. However,
before issuing notice on the application for condonation of delay, we
deem it appropriate to examine the appeal on merits.
.
2. The grounds of appeal and the figures stated therein do not arise
out of the impugned order. Question of depreciation on computer and
computer peripherals was not a subject matter of the order passed by the
tribunal or the order under Section 263 of the Income Tax Act, 1961
(?Act? for short) passed by the Commissioner for assessment year 2006-07.
Figure of dividend income mentioned in the grounds of appeal is also
incorrect and not Rs.28,20,145/- but Rs.24,12,482/-. We do not know from
where and how the Revenue has calculated that the tax effect as
Rs.1,55,93,845/-.
.
2A. Apart from the above defects, we feel that the appeal on merits is
liable to be dismissed in view of the decision of this Court in CIT Vs.
Sunbeam Auto Ltd. [2010] 189 Taxman 436 (Del) as it is a case where
inquiries were made by the Assessing Officer and thereafter the assessee
had written a letter and offered Rs.94,47,712/- as a disallowance under
Section 14A. The said amount was accepted by the Assessing Officer. As
already noted above, the dividend income was Rs.24,12,482/-. Assessee
also justified and explained why disallowance of Rs.94,47,712/- should be
made by stating that they had obtained term loan of Rs.35 crores from a
.
bank which had been deposited in an FDR to earn interest. After netting off, interest paid on the loan from interest earned, the assessee had
offered Rs.94,47,712/-
.
3. Commissioner in his order under Section 263 has stated that it
appears that the Assessing Officer had not caused any enquiry to
ascertain quantum of the disallowance. This is factually incorrect. The
Assessing Officer had conducted inquiry and had accepted the disallowance
which was offered by the assessee. The Commissioner has further recorded
that the Assessing Officer should have conducted further inquiries and
correct disallowance should be made under Section 14A read with Rule 8D.
The assessment year in question is 2006-07 and Rule 8D is not
retrospective. In any case, for applying Rule 8D certain pre conditions
have to be satisfied. There is also a stray observation by the
Commissioner to the effect that no explanation was offered why the
respondent had surrendered Rs.94,47,712/- for disallowance as the term
loan did not cover the investment made. The said observation does not
refer to any details or basis. In any case, once the matter was examined
by the Assessing Officer and he had conducted inquiry and accepted the
surrender of the assessee, the ratio of the decision in Sunbeam Auto Ltd.
(supra) is applicable. Assessment order does not become erroneous because
the Assessing Officer after verification accepts the claim/disallowance.
It will be erroneous if the Commissioner holds that the finding recorded
by the Assessing Officer is incorrect or contrary to law. Without a firm
finding, the Commissioner cannot set aside the assessment for fresh
determination. The said decision was followed and explained in Income-tax
Officer v DG Housing Projects Ltd. (2012) 343 ITR 329 (Del.) wherein it
has been held as under:-
.
?Thus, in cases of wrong opinion or finding on the merits, the
Commissioner of Income-tax has to come to the conclusion and himself
decide that the order is erroneous, by conducting necessary enquiry, if
required and necessary, before the order under section 263 is passed. In
such cases, the order of the Assessing Officer will be erroneous because
the order passed is not sustainable in law and the said finding must be
recorded. The Commissioner of Income-tax cannot remand the matter to the
Assessing Officer to decide whether the findings recorded are erroneous.
In cases where there is inadequate enquiry but not lack of enquiry, again
the Commissioner of Income-tax must give and record a finding that the
order/inquiry made is erroneous. This can happen if an enquiry and
verification is conducted by the Commissioner of Income-tax and he is
able to establish and show the error or mistake made by the Assessing
Officer, making the order unsustainable in law. In some cases possibly
though rarely, the Commissioner of Income-tax can also show and establish
that the facts on record or inferences drawn from facts on record per se
justified and mandated further enquiry or investigation but the Assessing
Officer had erroneously not undertaken the same. However, the said
finding must be clear, unambiguous and not debatable. The matter cannot
be remitted for a fresh decision to the Assessing Officer to conduct
further enquiries without a finding that the order is erroneous. Finding
that the order is erroneous is a condition or requirement which must be
satisfied for exercise of jurisdiction under section 263 of the Act. In
such matters, to remand the matter/issue to the Assessing Officer would
imply and mean the Commissioner of Income-tax has not examined and
decided whether or not the order is erroneous but has directed the
Assessing Officer to decide the aspect/question.
.
.
.
This distinction must be kept in mind by the Commissioner of Income tax
while exercising jurisdiction under section 263 of the Act and in the
absence of the finding that the order is erroneous and prejudicial to the
interests of the Revenue, exercise of jurisdiction under the said section
is not sustainable. In most cases of alleged ‘‘inadequate investigation’‘,
it will be difficult to hold that the order of the Assessing Officer, who
had conducted enquiries and had acted as an investigator, is erroneous,
without the Commissioner of Income-tax conducting verification/inquiry.
The order of the Assessing Officer may be or may not be wrong. The
Commissioner of Income-tax cannot direct reconsideration on this ground
but only when the order is erroneous. An order of remit cannot be passed
by the Commissioner of Income-tax to ask the Assessing Officer to decide
whether the order was erroneous. This is not permissible. An order is not
erroneous, unless the Commissioner of Income-tax hold and records reasons
why it is erroneous. An order will not become erroneous because on remit,
the Assessing Officer may decide that the order is erroneous.
.
.
.
Therefore, the Commissioner of Income-tax must after recording reasons
hold that the order is erroneous. The jurisdictional precondition
stipulated is that the Commissioner of Income-tax must come to the
conclusion that the order is erroneous and is unsustainable in law. We
may notice that the material which the Commissioner of Income-tax can
rely includes not only the record as it stands at the time when the order
in question was passed by the Assessing Officer but also the record as
it stands at the time of examination by the Commissioner of Income-tax
(see CIT v. Shree Manjunathesware Packing Products and Camphor Works
[1998] 231 ITR 53 (SC)). Nothing bars/prohibits the Commissioner of
Income-tax from collecting and relying upon new/additional
material/evidence to show and state that the order of the Assessing
Officer is erroneous.?
.
.
.
4. Learned counsel for the appellant-Revenue has relied upon the order
dated 19th December, 2011 passed in ITA 1074/2011 in the case of the
respondent. In the said case there were two issues. Dividend income of
Rs.28,20,145/- was exempt from tax but no disallowance had been made
under Section 14A. In the present case, we notice that disallowance has
been made under Section 14A and the question was whether a higher
disallowance of more than Rs.94 lakhs would have been made and the
Commissioner has not given or formed any opinion on whether or not the
said disallowance was satisfactory or not. Commissioner was not sure and
certain, though the Assessing Officer had applied his mind and accepted
the offer made by the assessee.
.
5. In view of the aforesaid position, we are not inclined to issue
notice on the application for condonation of delay and as a sequitur the
application and appeal are dismissed.
.
.
.
.
.
SANJIV KHANNA, J.
.
.
.
.
.
.
.
SANJEEV SACHDEVA, J.
.
SEPTEMBER 13, 2013
.
NA/VKR
.
.
.
.
.
.
.
.
.
.
.