The judgment of the court was delivered by
Hasnain Massodi, J. - Though the Income Tax Appeals on hand stand admitted to hearing on 30.04.2002, yet Division Bench of this Court, while admitting Appeals, has not opined whether any substantial question of law was raised, neither framed substantial question of law for determination as required under Section 260A of the Income Tax Act. Since Appeals are awaiting disposal for last 12 years, we deem it proper to assume that Appeals have been admitted on substantial questions of law catalogued in para 02 of memoranda of appeals. We accordingly proceed to deal with the Appeals on hand.
2. Respondents in both the Income Tax Appeals on hand are Private Limited Companies engaged in business of purchase and sale of shares, debentures and other securities.
3. Green Field Commercial Private Limited (respondent in ITA No. 02/2002) filed Return on 28th November 1995, disclosing loss of Rs. 1,12,86,432.00. The Return was processed under Section 143(1)(a), Income Tax Act, 1961. On 26th June 1996 the Assessing Officer in exercise of powers under Section 143(2)/143(1) addressed a questionnaire to respondent. Assessing Officer on 12th March, 1998, after receiving response to questionnaire and on examination of accounts accepted total loss as declared provided under Section 143(1)(a) at Rs. 1,12,68,432.00.
4. M/s Rangers Commercial Private Limited (respondent in ITA No. 01/2002) engaged in business of purchase and sale of shares, debentures and other securities. The Company filed Return on 28th November 1995, disclosing loss of Rs. 18,07,900.00. The Return was processed under Section 143(1)(a), Income Tax Act, 1961. On 2nd February 1996, Assessing Officer in exercise of powers under Section 143(2)/143(1) addressed a questionnaire to respondent. Assessing officer on 12th March 1998, after receiving response to questionnaire and on examination of accounts accepted total loss as declared/provided under Section 143(1)(a) at Rs. 8,07,900.00.
5. Commissioner, Income tax, Amritsar (for short "CIT, Amritsar"). In exercise of powers under Section 263, Income Tax Act, on 21st March 2000, set-aside assessment order dated 12th March 1998 and directed Assessing Officer to re-examine the matter and deal with issues raised in CIT Amritsar's order dated 21st March 2000, after giving assesses reasonable opportunity to bring all relevant facts and evidence to the notice of Assessing office.
6. The issue raised by CIT Amritsar while exercising revisional powers under Section 264 of the Act, was whether "deferred revenue expenditure" should be allowed fully in one year or be deferred according to entries made by assessee in this regard and whether the loss claimed by assessee was a genuine loss and whether it was revenue or capital loss.
7. Assessees - respondents herein, questioned CIT Amritsar's order dated 21st March 2000 in two separate appeals, being ITA No. 264(ASR)2000 and ITA No. 277(ASR)2000. The Income Tax Appellate Tribunal, Amritsar Bench (for short "Tribunal"), opining that identical issues were involved in two appeals, heard appeals together and allowed both Appeals vide its order dated 24th October 2001. Tribunal quashed order dated 21st March 2000 rendered by CIT Amritsar, whereby assessment orders were set-aside and Assessing Officer asked to examine the matter afresh.
8. The Tribunal order dated 24th October 2001 is question in Income Tax Appeals on hand on the ground set out in the memoranda of appeals.
9. Learned Tribunal has taken a view that CIT Amritsar while exercising revision power under Section 263 of the Act failed to deal with the case set up by respondents in response to notice issued on 24th January 2000. Tribunal held that CIT Amritsar erroneously held Assessing Officer not to have considered the matter in depth and examined all aspects of controversy involved. In the opinion of Tribunal, the record available before CIT Amritsar would not justify observation the Assessing Officer had acted in slipshod manner, rendered a "thumb nail" order and that too without adequate hearing of the matter CIT Amritsar was held to have failed to record his satisfaction that order in respect whereof revisional powers under Section 263 of the Act were being exercised, was "erroneous" - a prerequisite for exercise of said jurisdiction. Reliance on Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 802, was held to be misplaced inasmuch as facts of case before CIT Amritsar were markedly different from facts of the reported case.
10. We have gone through ITAT Amritsar Order dated 24th October 2001 under challenge as also record available on the file. We have heard learned counsel for parties.
11. The controversy relates to loss suffered on account of purchase and sale of non-convertible portion of debentures by respondents companies. Assessing Officer did not accept the Return in a mechanical manner but took it up for close scrutiny. Notices were issued under Section 143(2)/142(1) of the act along with necessary questionarie to respondents companies. The Companies appeared before Assessing Officer through their representatives and participated in the proceedings, stretching over a period of few years. Respondent companies did not only answer questionnaire but as evident from Assessment Order, produced books of account and other record before Assessing Officer, to reinforce their stand. It was not, therefore, right to conclude that Assessing officer "did not give many hearing and thumb nail order was passed" or that record of assessee was not examined at the time of assessment. The Tribunal, in the circumstances, was right in concluding that reasons details in CIT Amritsar's order dated 21st July 2000 would not justify the conclusions drawn.
12. Section 263 of the Act confers revisional jurisdiction of Commissioner Income Tax. The jurisdiction is to be exercised where Commissioner of Income Tax is satisfied that any order passed by Assessing Officer is (i) erroneous and (ii) prejudicial to interests of revenue. It is therefore, incumbent upon Commissioner to record his satisfaction that order of Assessing Officer is "erroneous". To arrive at such conclusion, Commissioner obviously, has to spell out reasons that prompt and persuade him to hold so. In the case in hand, CIT Amritsar did not give any reason at all to conclude that order of Assessing Officer was "erroneous". It merely stated that order is "erroneous one" without elucidating the matter. The only reason that weighed with CIT Amritsar to find fault with order of Assessing Officer, appears to be his perception that Assessing Officer did not give "many hearing" and a "thumb nail order" was passed by him. This observation would not make an order "erroneous". It does not require any emphasis that authority exercising supervisory or revisional jurisdiction, is to give reasons in support of conclusions drawn. Same is true even about any executive order that has civil consequences for a person affected by such order. The reasons are said to be live links between the mind of authority, making order and conclusions drawn on the strength of such reasons. CIT Amritsar having failed to record satisfaction that the order in respect whereof revisional powers were exercised was "erroneous", lacked jurisdiction to exercise such power. This by itself was sufficient for Tribunal to interfere and set-aside the order of CIT Amritsar assailed before it.
13. CIT Amritsar in its notice dated 24th January 2000 sought response from respondent companies on the issues highlighted in the notice namely that loss claimed to have suffered on account of purchase and sale of non-convertible debentures was in fact "deferred expenditure" disentitling respondent company from any allowance on such loss in one year and that whether the loss claimed was revenue or capital loss. CIT Amritsar referred to Madras Industrial Investment Corpn. Ltd. case (supra) in support of his opinion as regards deferred loss. Respondent companies submitted a detailed reply to the notice issued, controverting all factual aspects of the case reflected in the notice emphasizing that Madras Industrial Investment Corpn. Ltd. case (supra) was distinguishable on facts and not applicable to the controversy raised in notice. CIT Amritsar surprisingly in its order dated 21st March 2000, did not deal with detailed reply supported by reasons, submitted by respondent companies. Least that was expected of CIT Amritsar was to make reasonable and fair discussion of the reply, and material referred to in such reply and given reasons for recording disagreement with stand taken in the reply. Otherwise granting an opportunity to assessee as required under Section 263 of the Act would be reduced to an idle formality. This is what has been exactly done by CIT Amritsar. The mode and manner in which the matter has been dealt with is in gross violation of mandate of Section 263 of the Act.
14. There is no scope with any disagreement with the Tribunal that facts of Madras Industrial Investment Corpn. Ltd. case (supra) were distinguishable from facts before CIT Amritsar. In the aforementioned case, company had issued debentures at a discount, on which higher rate was payable on maturity. The Apex Court against said backdrop held that the amount of discount was not a loss out an expenditure incurred by company in order to generate funds for its business activities and that as the discount was payable in the total period of debentures issued, it was to be allowed on pro rata application of period of debentures. In the case before CIT Amritsar, loss had occurred on account of sale of non-convertible debentures.
15. Tribunal, while dealing with the Appeals against CIT Amritsar orders has made a detailed and comprehensive discussion on all aspects of the matter and reinforced conclusions drawn with the details reference to the case law on the subject. The reasons detailed by Tribunal while allowing Appeals cannot be faulted on any of the grounds urged in the Appeals.
16. For the reasons discussed we answer all the substantial questions of law against appellant and in favour of respondents. We accordingly hold that:
(i) Tribunal (ITAT Amritsar) was right in holding that there were no compelling reasons for interference for the CIT Amritsar under Section 263, Income Tax Act;
(ii) Tribunal (ITAT) was right in holding that law laid down in Madras Industrial Investment Corpn. Ltd.'s case (supra), as not applicable to the facts of the case;
(iii) Tribunal (ITAT) did not err while interfering with the order passed by CIT Amritsar;
(iv) Tribunal (ITAT) was right in holding that CIT Amritsar has not demonstrated as to how Assessing officer has not examined the necessary documents and explanations;
(v) Tribunal (ITAT) was right in holding that CIT Amritsar has left the enquiries made by Assessing Officer without reaching a firm conclusion.
17. Dismissed.