Case Law Details
RELEVANT PARAGRAPH
11. I have duly considered the rival contentions and the material en record. The perception of the CIT that the profit is low prompted him to issue show cause notice to the assessee. Profit before taxation of the company as a whole for the year under consideration is Rs. 3303.42 lakhs as compared to Rs. 3561.15 lakhs for the immediate preceding year. Thus, there is a fall in profits by Rs. 257.73 lakhs. On the other hand, the total revenue has increased from Rs. 193946.48 lakhs to Rs. 219195.88 lakhs. The report of the directors mentions that barring a couple of divisions, the overall performance was good. The directors also considered it to be a notable achievement that the company crossed the Rs. 2000 crore turnover mark. In such a high volume consisting of thousands of crores, from the annual accounts of the company I am unable to comprehend about which additional extra ordinary income of more than Rs.8 crores the CIT is talking about. Be that as it may, the purpose of giving the above details is to drive home the point that it is a matter of perception which varies from person to person as to whether the fall of Rs. 257.73 lakhs is really eyebrow raising or not. Therefore, when the Assessing Officer, who is both, an adjudicator as well as an investigator, is acting in a quasi judicial capacity, it is his perception which counts and not that of the CIT sitting in revisionary proceedings. The entire annual accounts are before the Assessing Officer. From the annual accounts itself he can probe into various aspects wherever he feels the need to do so. The schedule of sales and services gives a break up of revenues earned from various activities. Similarly, the schedule showing cost of goods sold as well as the cost of services gives a fair view about the expenses incurred by the assessee. A proper scrutiny of these schedules can prompt the Assessing Officer to make further inquiries. But before making such detailed inquiry, he should be satisfied that a particular expenditure is wrongly claimed or a particular revenue item is suppressed and so on. If the Assessing Officer is able to locate such leakages; but then fails to make further enquiry, then it would be an error on his part which may render the order passed by him to be erroneous and prejudicial to the interests of revenue. In the instant case, it is not only the detailed published accounts that were before him but, in the course of assessment proceedings also the Assessing Officer has looked into several aspects requiring his attention. He has inquired about the increase in loans, additions to the investments and fixed assets, break up of miscellaneous income, break up of miscellaneous expenses and so on. Besides looking into these general aspects, he has looked into many specific items also like upfront fee paid to IDBI, processing charges paid to HDFC, claim of deduction in respect of penalty paid to TASMAC, break up of provisions written back, details of warrant liabilities, commission etc. Having probed into the details as he thought fit, the Assessing Officer never felt the necessity to call for division-wise profit and loss account and balance sheet. However, the CIT called for such separate accounts and wants the Assessing Officer to examine them in detail. I fail to understand as to where is the error in the assessment order. Is it an error not to conduct any enquiry into the accounts the way the CIT wants it? In my opinion, the answer to this question has to be NO in block letters. In the case of CIT v. Kanda Rice Mills (178 ITR 446), the Punjab & Haryana High Court held that mere observation by the CIT in his order that these were the points which deserved consideration, was beyond the provisions of sec.263. In the instant case also, the CIT wants the Assessing Officer to make the assessment in a particular manner. Madras High Court, in the case of CIT v. Sakthi Charities (160 OR 107) held that the power of revision is not meant to be exercised for the purpose of directing the Assessing Officer to hold another investigation when the order of the officer is not found to be erroneous. And it is in this context that the Bombay High Court held in the case of CIT v. Gabriel India Ltd. (203 ITR 108) that in the garb of exercising power under sec. 263, the Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiry in matters or orders which are already concluded. It is well established that an order cannot be termed as erroneous unless it is not in accordance with law. Thus, if the Assessing Officer has made the assessment by making such inquiries as he deemed fit, the order cannot be termed as erroneous. In this context, the Bombay High Court held in the case of Gabriel (supra) that sec. 263 does not visualise a case of substitution of the judgement of the Commissioner for that of the Assessing Officer. The Assessing Officer in the present case did not find anything starting in the marginal drop in profits and for that reason the CIT held his order to be erroneous. This is not envisaged under sec.263 of the Act. Again, in the same judgement it was observed that there must be some prima facie material on record to show that tax which was lawfully eligible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. In the present case, no such material is there for the CIT to hold the order to be erroneous. The various points noted by him are mere illustrations which according to him should have been looked into by the Assessing Officer. As a matter of fact, while dealing with the aspect of profits, the CIT has not been able to show a single error in the order of the Assessing Officer. Therefore, in the light of the foregoing discussion, 1 agree with the view taken by the id. A.M. and disagree with the view of the Ld. J.M.
