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Attorney(S)
  • Manish BhattMs. Mauna M. Bhatt
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  • AKIL KURESHIB.N. Karia
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Attorney(S)
  • Manish BhattMs. Mauna M. Bhatt
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  • AKIL KURESHIB.N. Karia
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Smart Summary

Factual and Procedural Background

The respondent (an individual assessee) underwent block assessment for the period 01.04.1996 to 25.07.2002. Two disputed issues emerged in the assessment: (1) introduction of Rs. 82.16 lakhs in the assessee's capital account and (2) receipt of approximately Rs. 3.78 crores by way of unsecured loans from his brother, Shri Suresh Galani. The Assessing Officer (AO) issued notices, received multiple replies and documents from the assessee (including confirmations, balance sheets, bank statements and audited financials of the brother's business), and ultimately passed the assessment order on 30.07.2004 making no additions on these two heads (i.e., appearing to accept the assessee's contentions though without detailed discussion in the speaking order).

The Commissioner of Income Tax (CIT) formed a prima facie view that the AO's failure to make additions on these issues rendered the assessment order erroneous and prejudicial to the interests of the Revenue and issued a notice under section 263 to revise the order. The CIT's concern focused on alleged lack of proof of the genuineness and mode of foreign remittances and absence of authenticated bank account details showing the remittances. The CIT remitted the matter to the AO by order dated 24.03.2006 for further inquiry.

The assessee appealed to the Income Tax Appellate Tribunal (the Tribunal), which set aside the CIT's revision and held that the case did not warrant exercise of powers under section 263 because material was on record, the AO had considered it and reached a view, and the CIT could not simply take a different view. The Revenue filed the present appeal challenging the Tribunal's decision; the appeal was admitted on a substantial question of law concerning whether the Tribunal was justified in holding the AO's order was neither erroneous nor prejudicial to the Revenue when the AO allegedly did not carry out full and complete inquiry into fresh capital and unsecured loans.

Legal Issues Presented

  1. Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in law in holding that the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue, particularly when a full and complete enquiry in respect of fresh capital and unsecured loans was not carried out by the Assessing Officer?

Arguments of the Parties

Appellant's Arguments (Revenue)

  • The Assessing Officer failed to carry out vital inquiries regarding the manner of foreign remittances and receipt of loans, particularly in relation to the foreign remittances and alleged unsecured loans from the brother (Shri Suresh Galani).
  • The Commissioner only required the AO to frame a fresh assessment to conduct necessary inquiries and was within his powers to remit the matter when the AO had failed to carry out necessary inquiries.
  • Primary concern: absence of precise authenticated bank account details and lack of proof about mode/source of remittances, raising the possibility of hawala or purchases of foreign currency in India rather than genuine foreign remittances.

Respondent's Arguments (Assessee)

  • The Assessing Officer had conducted detailed inquiries, during which the assessee filed multiple detailed replies and produced documents (balance sheets, confirmations, bank statements, passport copy of the brother, audited financial statements of the brother's firm and other evidence).
  • Only after examining such material did the AO accept the genuineness of the capital introduction and unsecured loans; therefore the AO's order could not be said to be erroneous or prejudicial to the Revenue.
  • The assessee emphasised the identity and creditworthiness of the brother, his long residence and commercial standing in Dubai, and production of documentary support for these facts.
  • The assessee relied on various High Court decisions (referred to in the judgment) supporting the view that mere difference of opinion does not justify exercise of revisional jurisdiction under section 263.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 (Delhi High Court, Division Bench) Principle that an Assessing Officer need not give detailed reasons for every item; distinction between "lack of inquiry" and "inadequate inquiry" — if any inquiry was made (even if inadequate) that ordinarily does not permit exercise of revision under section 263 merely because the revising authority disagrees; only "lack of inquiry" may justify s.263. The Court relied on this distinction to assess whether the AO had conducted any inquiry. It concluded that the AO had made inquiries and taken a view, so the CIT could not use s.263 merely because he preferred a different view.
ITO v. DG Housing Projects Ltd. [2012] 343 ITR 329/[2013] 212 Taxman 132 A finding that the assessment order is erroneous is a necessary condition before exercising jurisdiction under section 263; remitting the matter for further enquiries without such a finding is impermissible. The Court invoked this principle to hold that the CIT must have found the AO's order erroneous before remanding; given the record, such a finding was not established.
CIT v. Jawahar Bhattacharjee [2012] 341 ITR 434/209 Taxman 174 Failure to hold normal inquiries or failure to apply mind to relevant material can render an assessment order erroneous and justify exercise of revisional jurisdiction under section 263. The Court used this authority to delineate the correct scope of s.263 — it applies where there is no inquiry or no application of mind. The Court then contrasted that situation with the present case, where inquiries were made.
CIT v. Arvind Jewellers [2003] 259 ITR 502/[2002] 124 Taxman 615 (Gujarat High Court, Division Bench) Section 263 cannot be used to correct every mistake; it is attracted only when the order is erroneous — e.g., wrong assumption of facts, incorrect application of law, lack of due application of mind; differing but sustainable views taken by the AO do not make an order erroneous. The Court invoked this line to emphasise that where the AO adopted a plausible view after inquiry, the revisional jurisdiction of the CIT cannot be exercised simply because another view is possible.
Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (Supreme Court) Limits the invocation of section 263 — not every error or loss of revenue attracts s.263; an AO's view that is permissible in law cannot be undone by revision merely because it causes loss of revenue. Cited via Arvind Jewellers to reinforce that the AO's adoption of a permissible view precludes invoking section 263 absent unsustainability of that view.
Gabriel India Ltd. (referenced) Cited in the Sunbeam Auto discussion to illustrate the law distinguishing lack of inquiry from inadequate inquiry. The Court referenced this precedent through the Sunbeam discussion to support the principle that some inquiry (even if scant) normally bars use of s.263.
Daga Entrade P. Ltd. (Gauhati) and Rajendra Singh (Gauhati) (referenced in Jawahar Bhattacharjee) Authorities on the scope of section 263 and circumstances when revisional jurisdiction is available (as discussed in Jawahar Bhattacharjee). The Court relied on Jawahar Bhattacharjee's summary of these authorities to show that jurisdiction under section 263 can be exercised when assessment is erroneous due to lack of inquiry or lack of application of mind.

Court's Reasoning and Analysis

The Court proceeded by identifying the governing legal principles on the scope of revision under section 263 (drawing on cited authorities) and then testing the facts of the case against those principles.

Key analytical steps:

  1. The Court recalled that section 263 permits revisional jurisdiction only where the order of assessment is "erroneous and prejudicial to the interest of the Revenue." Authorities establish that the power is properly exercised when there is no inquiry, no proper inquiry, or no application of mind by the AO — not when the AO has made an inquiry and taken a plausible view.
  2. The Court examined the record to see whether the AO had conducted inquiries. It noted that the AO had issued notices and the assessee filed five detailed replies with supporting documents: balance sheets, capital account details, confirmations of loans, bank statements, passport copy of the brother, letters from bankers, audited financial statements of the brother's business in Dubai, and other documentary material.
  3. The Court observed that the AO, after such inquiries and receipt of material, made no additions on the two contested heads (capital introduction and loans from brother), effectively accepting the assessee's contentions. The Court treated these exchanges and documents as evidence that inquiries were undertaken and a view was formed by the AO.
  4. The CIT's objections were then considered: (a) the AO did not verify whether remittances were genuine foreign remittances as opposed to hawala or purchase of foreign currency in India, and (b) neither the AO nor the CIT had been furnished with authenticated bank account copies showing the precise fund transfers. The CIT remanded to the AO to insist on authenticated bank accounts and to make further inquiries.
  5. The Court found that the CIT's contentions were speculative, unsupported by material in the CIT's own order, and amounted to mere apprehension or surmise. The Court noted that the CIT did not point to any record that the assessee was asked to produce the precise bank details and had refused or failed to do so. The CIT had not established that the AO conducted no inquiry; rather the AO conducted inquiries and considered material.
  6. Applying the precedents (Sunbeam Auto, ITO v. DG Housing Projects, Jawahar Bhattacharjee, Arvind Jewellers and Malabar), the Court concluded that where the AO has carried out inquiries and reached a plausible conclusion, the CIT cannot invoke section 263 merely because he would have preferred further verification or a different conclusion. A remand for further inquiry requires a foundation that the assessment order was erroneous; such a foundation was absent here.

Based on these factual findings and legal principles, the Court concluded that the Tribunal was correct in setting aside the CIT's order remitting the matter and that the CIT had wrongly invoked revisional jurisdiction.

Holding and Implications

FINAL HOLDING: The substantial question of law is answered against the Revenue and in favour of the assessee. The Tax Appeal by the Revenue is dismissed.

Implications:

  • The Tribunal's decision setting aside the CIT's order under section 263 and refusing the remand for further inquiries is affirmed by the Court. The direct effect is that the Assessing Officer's original assessment (which made no additions on the two contested heads) stands as not erroneous or prejudicial to the Revenue, as per the Court's conclusion on the record before it.
  • The Court applied established precedents to emphasize the limits of section 263: mere difference of opinion or speculative apprehensions by the revising authority do not justify reopening an assessment where the AO has in fact conducted inquiries and reached a plausible view.
  • The opinion does not purport to lay down a new principle of law beyond applying existing authorities; no broader novel precedent is stated in the text beyond the application of cited authorities to the facts of this case.
Show full summary ...

    Commissioner of Income Tax v. Kamal Galani

    JUDGMENT

    Akil Kureshi, J. - This appeal was admitted for consideration of following substantial question of law:

    "Whether on facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of the revenue, particularly when full and complete enquiry in respect of fresh capital and unsecured loans was not carried out by the Assessing Officer?"

    2. Briefly stated the facts are as under:

    The respondent-assessee, an individual, was subjected to block assessment proceedings for the block period 01.04.1996 to 25.07.2002. During such assessment proceedings, several issues cropped up, two of which have travelled before us. One such issue was introduction of a sum of Rs. 82.16 lacs in the capital account of the assessee and the other issue was of the receipt of Rs. 3.78 crores by an assessee by way of loan from his brother Suresh Galani. The Assessing Officer called upon the assessee to explain both these amounts during the assessment proceedings. The assessee responded by filing multiple replies and producing various documents. The Assessing Officer passed the order of assessment on 30.07.2004. In such order, the Assessing Officer appears to have discussed by speaking order only those areas where he proposed to make additions or disallowances. With respect to the above two controversial issues, the Assessing Officer made no additions. In other words, the Assessing Officer accepted the contentions of the assessee but without detail discussion in the order of assessment.

    3. The Commissioner of Income Tax was, however, prima facie of the opinion that to the extent, the Assessing Officer failed to make the additions on these two issues, the order of assessment was erroneous and prejudicial to the interest of the Revenue. He, therefore, issued a notice seeking to take the order of assessment in revision in exercise of powers under section 263 of the Income Tax Act, 1961 ['the Act' for short]. The assessee strongly opposed such proceedings and mainly canvassed that the Assessing Officer had carried out detailed inquiries during which, the assessee had produced reliable and cogent evidence. It was only after such inquiry that the Assessing Officer had accepted the stand of the assessee. The order passed by the Assessing Officer cannot be stated to be either erroneous or prejudicial to the interest of the Revenue.

    4. Commissioner of Income Tax, however, ignored such pleas of the assessee. He was of the opinion that the Assessing Officer had not carried out proper inquiries with respect to both the issues. The assessee had not placed before the Assessing Officer or before the Commissioner, the accounts from which such transactions were made. He did not dispute either the identity of the donor or his creditworthiness. He, however, doubted the very genuineness of the transaction. He, therefore, remitted the matter back to the Assessing Officer for carrying out further inquiries by his order dated 24.03.2006.

    5. The assessee carried the matter in appeal before the Tribunal. The Tribunal, by the impugned judgement, set aside the order of the Commissioner holding that the case did not warrant exercise of powers under section 263 of the Act and the Commissioner had wrongly invoked such powers. The Tribunal was of the opinion that necessary material was on record. Assessing Officer had considered the material and a particular view was taken. CIT (A) could not have exercised revisional powers for taking a different view.

    6. In this background, the present appeal at the hands of the Revenue arises. Learned counsel Mr. Manish Bhatt for the department supported the order of Commissioner of Income Tax and submitted that the Assessing Officer failed to carry out vital inquiries with respect to the very manner of transactions of foreign remittances. The Commissioner merely required the Assessing Officer to do so framing fresh assessment. Commissioner was within his powers to do so when it was found that the Assessing Officer had failed to carry out the necessary inquiries.

    7. On the other hand, learned counsel Mr. Soparkar opposed the appeal contending that the Assessing Officer had carried out detail inquiries. The Assessee had produced all necessary materials before the Assessing Officer. Only after examining such material, the Assessing Officer was satisfied about the genuineness of introduction of the capital in accounts of the assesseee and all the unsecured loans received from his brother. He relied on certain decisions of various High Courts to which, reference would be made at a later stage.

    8. Having thus noted the broad contours of the controversy, we may examine the materials on record more closely. We may recall, during the course of block assessment, the Assessing Officer noticed introduction of capital of Rs. 82.16 lacs and that the assesee had received unsecured loans to the extent of Rs. 3.28 crores from his brother. In response to the notices issued by the Assessing Officer in this respect, the assessee filed as many as five detailed replies. Relevant portion of such replies may be extracted. In the reply dated 06.05.2004 the assessee conveyed as under:

    "The Balance Sheet representing the statement of affairs as on 31st March, 2002 has been filed alongwith the Return of Income, as pointed out by your goodself in point No. 6. Further, the sources of funds have been from three sources viz. overdraft account with Indusind Bank, Loan from Shri Suresh Galani and personal Capital of the Assessee introduced and remitted from abroad from time to time in the earlier years. The total application of the above funds represented by the various assets is appearing in the Balance Sheet.

    The capital account for Assessment year 2001-2002 i.e. as on 31st March, 2001 is enclosed. The confirmation from Shri Suresh Galani for the loan taken has already been filed during the post search inquiries. The books of accounts were also produced during the post search inquiries. The Bank Statement of the overdraft account of Indusind Bank will be filed in due course of time."

    The assessee produced supporting documents along with the said reply.

    9. In another reply dated 14.06.2004, the assessee further averred as under:

    "(b) The other part of the capital comprises of amounts remitted from abroad during the period when the Assessee was NRI. The funds remitted were out of his personal capital generated over the period of years during his residence abroad. The remittance has been as follows:

      Financial Year Amount
      1996-1997 Rs. 34,16,200
      1997-1998 Rs. 48,00,000

    Further, we would also like to mention that these funds have been directly remitted to M/s. West Inn Limited through Demand Draft being send directly from abroad. This is evidenced from the Balance Sheet of the Assessee as on 31.03.1997 and 31.03.1998. The necessary approvals from the Reserve Bank of India for the acquisition of Shares in M/s. West Inn Limited from funds remitted from abroad was duly obtained by the Assessee and the same has been filed earlier.

    The entire remittance has been through permitted banking channels and during the year 1996 to 1998. The residential status of the Assessee during these years was that of Non-Resident Indian residing permanently abroad. The source of funds has been the personal capital accumulated over the years of residence abroad (more than 20 years).

    In view of the above we submit that the first source of personal capital balance of Rs. 1,32,28,241.78 is fully explained.

    (2) With respect to the Second Source of funds of Rs. 1,69,13,536.43 pertaining to the Bank overdraft Account (NRO) with Indusind Bank, Bandra, Mumbai, we would like to submit that the amount represents overdrawn balance in the Bank Account. The copy of Bank Statement has been filed earlier evidencing the balance as on 31.03.2002.

    (3) With respect to the third source of funds being the loans received from Shri Suresh Galani of Rs. 3,78,03,337.00 We would like to submit that Mr. Suresh Galani is the elder brother of the assessee.

    The funds have been received from time to time through his personal NRE Account (being a NRI). Further, some payments have also been remitted from abroad directly by Mr. Suresh Galani on behalf of our Assessee through approved banking channels. The loan has been accumulated over the period of years.

    Mr. Suresh Galani is a NRI residing in Dubai for past more than 25 years and is carrying Trading Business in Dubai. He is a high net worth individual having capacity to lend such loan to the Assessee. The copy of passport has been already filed as an evidence his identity and residential status.

    He also assessed to tax and covered in the Block Assessment with your honour. Further the State of Affairs carried on by Mr. Suresh Galani in India through his various NRE Bank Account are separately dealt in his block assessment proceedings. The confirmation of the loan given to the assessee is enclosed herewith.

    In respect of the loan received, as stated above we summarise that:

  • (a) Suresh Galani is the real brother of the assessee.
  • (b) Copy of the Passport has been filed evidencing his identity.
  • (c) He is a NRI residing in Dubai, carrying on Business there for past more than 25 years.
  • (d) The confirmation for loan given by him is enclosed.
  • (e) The sum advance to the assessee are from funds remitted from NRE Bank Account or from approved banking channels.
  • (f) He is a high net worth person having accumulated capital abroad to lend the loan to the Assessee.
  • (g) He is assessed to tax and covered in the Block Assessment.

    • Therefore, we submit that the entire source of the funds as per the statement of affairs filed before your honour are fully explainable and consequently the application thereof in form of the various assets are also explained."

    10. In a further reply dated 25.06.2004, the assessee, pointed out that his brother Suresh Galani is also assessed by the same Assessing Officer and further stated as under:

    "Sir, as already stated earlier Shri Suresh Galani has been residing in Dubai since 1976 and over the period of years, he has established himself with good reputation in the business and social circles. He is reputed businessman and commands goodwill with the bankers. Copy of letters of bankers is enclosed.

    He is also a member of India Club, Dubai since 1990 and one of the trustee of Shri Gurudwara (Sindhi Temple), being a very old and active religious organization in Dubai. He is also the trustee with Indian High School in Dubai. He is an active member in the Managing Committee of Indian Business and Professional Council (IBPC) and active member of Overseas Indians Economic Forum-UAE.

    Sir, Shri Suresh Galani started business in the name of M/s. Galani International. The commercial license issued by the Department of Economic Development, Government of Dubai, United Arab Emirates, authorising the business was issued on 28th June 1980. The business has been carried out since over past 24 years. The copy of the license is enclosed herewith.

    M/s. Galani International is engaged in the business of wholesale and retail trading in electronic goods, garments and plastic products since inception. The copy of balance sheet and other financial statements are enclosed herewith reflecting the state of affairs and capital investment of Shri Suresh Galani."

    11. Alongwith such reply, the assessee enclosed several documents showing the status and standing of his brother Suresh Galani who was engaged in trading business in Dubai.

    12. Along with reply dated 15.07.2004, the assessee produced his audited financial statement of M/s. Galani International, Dubai.

    13. It was after such inquiries that the Assessing Officer passed the order of assessment in which, as noted above, he made no additions under these two heads. The Commissioner sought to revise this order for which he issued a notice dated 03.02.2006. His prima facie reasons for believing that the order of assessment was erroneous and prejudicial to the interest of the Revenue and therefore required to be revised were as under:

    "(ii) That the loans of Rs. 1,31,51,028/- in the F.Y. 1998-99 of Rs. 45,53,640/- in F.Y. 1999-2000, of Rs. 46,50,979/- in the F.Y. 2000-01 and of Rs. 1,55,60,690/- in the F.Y. 2001-02 credited in the name of Shri Suresh Galani, your elder brother, were accepted as genuine. From a perusal of the material on record, it emerges that you did not file any collateral documentary evidence in support of the genuineness of these transactions. The onus lay upon you to establish the identity and capacity of the creditor as also the genuineness of the transactions. No doubt, you filed evidence in support of the identity and capacity of the creditor but the third ingredient, i.e. genuineness of the transactions was not established. The mode and manner in which these amounts were received by you from Shri Suresh Galani were not explained. In fact, you in your explanation dated 25.06.2004 clearly expressed your inability to furnish any evidence in this regard stating that since the remittances from Shri Suresh Galani, either to hi NRE Account or otherwise from abroad were at different intervals and therefore, the exact nature/source of the funds from where these remittances were effected could not be identified on one to one basis. As you failed to establish the genuineness of these transactions, the amounts which aggregated to Rs. 3,78,06,337/- credited in the name of Shri Suresh Galani should not have been accepted as genuine. From the records, it is seen that no details of sources from where these amounts were transferred were filed. As Shri Suresh Galani is your read elder brother, there could be no excuse for not furnishing such details by you in the course of block assessment proceedings. You could have asked your brother to clearly disclose the mode and manner in which these amounts were brought to India and which later found place in your books by filing the copies of his bank accounts from where such payments were made to you. From a perusal of records, it clearly emerges that you did show any intention for establishing fund flow from your brother Shri Suresh Galani as merely the details of his other investments/deposits were submitted which does not prove the transactions in question. The onus lay upon you to prove that the loans in question were genuine funds transferred from your brother Shri Suresh Galani. By merely proving identity and creditworthiness of your brother, you could not have been treated to have discharged the onus cast upon you fully. As you failed to prove the genuineness of the transactions, such loans of Rs. 3,78,06,337/- shown in the name of Shri Suresh Galani should have been treated as unexplained and assessed as your disclosed income of the block period which obviously has not been done. Thus, prima facie, there is under assessment of undisclosed income of the block period to the extent of Rs. 3,78,06,337/- in your hands on this account."

    14. In the final order that the Commissioner passed, he held that the Assessing Officer did not make any inquiry to ascertain whether the funds shown to have been remitted from UAE were genuinely remitted from that country or it was a case that foreign currency was purchased by the assessee either from grey market in India or in UAE out of his unaccounted income earned in India and then deposited in NRE account or in the account of his brother. He was also of the opinion that the Assessing Officer did not make any attempt to find out by making proper inquiries whether the funds were remitted by the assessee out of his and his brother's income or it was the case of hawala transactions. He noted that the assessee had not filed either before the Assessing Officer or before himself the copies of authenticated bank account of his brother from where the said two funds were transferred or remitted to India which are eventually credited in the assessee's accounts. He therefore directed the Assessing Officer to carry out fresh assessment during which, the AO would insist on the assessee filing the authenticated copy of his own bank account and the bank account of his brother.

    15. The scope of the Commissioner's power of revision under section 263 has been a matter of judicial consideration on various ocassions. In case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 Division Bench of Delhi High Court observed as under:

    '12. … … … There are judgements galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not be itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry". that such a course of action would be open. In Gabriel India Ltd's case (supra), law on this aspect was discussed in the following manner:... …. … ]'

    16. In case of ITO v. DG Housing Projects Ltd. [2012] 343 ITR 329/[2013] 212 Taxman 132/20 taxmann.com 587 , Delhi High Court observed that a 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. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without such a finding.

    17. Full Bench of Gauhati High Court in case of CIT v. Jawahar Bhattacharjee [2012] 341 ITR 434/209 Taxman 174/24 taxmann.com 215 held that not holding such inquiry as is normal and not applying mind to relevant material in making assessment by the Assessing Officer would be an erroneous assessment warranting exercise of revisional jurisdiction. It was held as under:

    "23. Accordingly, we hold that Daga Entrade P. Ltd [2010] 327 ITR 467 (Gauhati) lays down correct law and the same is not in conflict with the earlier order of this court in Rajendra Singh [1990] 79 STC 10 (Gauhati). Jurisdiction under section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interest of the Revenue. Cases of assessment order passed on wrong assumption of facts, or incorrect application of law, without due application of mind or without following the principles of natural justice are not beyond the scope of section 263 of the Act. "

    18. In case of CIT v. Arvind Jewellers [2003] 259 ITR 502/[2002] 124 Taxman 615 (Guj.) Division Bench of this Court referring to the judgement of Supreme Court in case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 observed as under:

    "6. From the above observations made by the Supreme Court, it is clear that the provisions of Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Supreme Court has also made it clear that the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. It was further emphatically stated that when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law."

    19. In the context of present case, applying the ratio of the above noted decision, the scope of the Commissioner's power of revision u/s. 263 of the Act would be, when the Assessing Officer conducts no inquiry or proper inquiries or does not apply his mind to the legal issues arising out of the material on record, the revisional powers would be available. On the other hand, if the Assessing Officer has conducted proper inquiries and come to legal conclusions which are plausible, the Commissioner would not be justified in invoking revisional jurisdiction directing further inquiries or taking a different view.

    20. In this context, we may recall, the Assessing Officer had examined two issues. With respect to introduction of the capital, the assessee had pointed out that he was an NRI for over two years and he had made foreign remittances over a period of time. With respect to the unsecured loan of Rs. 3.87 crores received from his brother also, the assessee had provided necessary details which were called upon by the Assessing Officer. We have reproduced some of the responses of the assessee only to highlight the nature of inquiries carried out by the Assessing Officer and the detailed answers given by the assessee. With respect to his brother, the assessee pointed out that he was running a successful business of trading, was engaged in various commercial and non-commercial activities. He was man of standing and means. In fact, the Commissioner has gone on record to suggest that he neither disputes the identity nor the creditworthiness of the brother of assessee to loan such amount.

    21. The Assessing Officer having carried out such detailed inquiries, it was not open for the Commissioner to thereafter reopen the issues on mere apprehension and surmises. His two fundamental objections were that the Assessing Officer did not verify whether the remittances were from the own income or sources of the assessee and his brother or were merely by way of hawala transactions. In the process, he was also critical of the Assessing Officer not insisting on collecting the details of the accounts from which the foreign remittances were made to the Indian account of the said two persons. Without any material without any basis, the CIT could not have remanded the proceedings to the Assessing Officer to carry out further inquiries in order to ascertain whether the remittances were genuine or were in the nature of hawala transactions. In the entire order of the Commissioner, we do not find any basis for him to carry such apprehension. His principle thrust was to the effect that assessee did not produce the precise bank details of the foreign remittances even before him. There is nothing on the record to suggest that he called upon the assessee to do so and the assessee failed or refused to do so.

    22. All in all, we find no error in the view of the Tribunal reversing view of the Commissioner. The question is thus answered against the Revenue and in favour of the assessee. Tax Appeal is dismissed.

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