TaxTMI 
TaxTMI 
2019 (12) TMI 1033
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....CIT was unjustified in setting aside the assessment order in exercise of his powers u/s 263 with respect to issues set out in the SCN without dealing on merits with the submissions made before him which proved that the assessment order u/s. 143(3) for the A.Y. 2014-15 was neither erroneous nor prejudicial to the interest of the revenue and further the CIT himself having not recorded any specific finding as to in what manner he found the AO's order to be erroneous in so far as it was prejudicial to the interest of the revenue; he was not justified in setting it aside and directing AO to pass the order afresh. 3) For that on the facts and in the circumstances of the case, the CIT erred in considering the assessment to be erroneous on account of alleged mismatch in turnover even though both before the AO as well as before the CIT cogent explanations were furnished explaining that there was no alleged mismatch for which the assessment order u/s 143(3) could be held to be erroneous & prejudicial to the revenue's interest. 4) For that on the facts and in the circumstances of the case, for the reasons set out in Para 2(a) of the SCN, the CIT was unjustified in tr....
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....failed to appreciate the facts of the appellant's case and applicable legal provision governing sale of Factory building which did not require execution of Conveyance. 11) For that on the facts and in the circumstances of the case, the CIT failed to understand that as per the applicable legal provision sale of Factory building did not require execution of registered Sale Deed, requiring stamp duty payment and further there being no material brought on record which proved that stamp duty value of the factory building was higher than the declared sale consideration the CIT was unjustified in considering the assessment order to be erroneous on the issue of not making reference to the Registered Valuer for determining value of factory building. 12) For that on the facts and in the circumstances of the case, the CIT was unjustified in considering the assessment order to be erroneous for not referring the valuation of the building and assets situated therein to the Registered Valuer even though there was no statutory provision in terms of which the reference was permissible to the Registered Valuer by the AO. 13) For that on the facts and in the circumstanc....
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....aimed in the Profit & Loss A/c 5. Large any other deduction claimed in such BP creating a loss without any income in Profit & Loss a/c 6. Depreciation claimed at higher rates/Higher additional depreciation claimed 7. Large value sale of consideration of property in ITR is less than sale consideration of property reported in TDS return under section 194IA 8. Mismatch in sales turnover reported in Audit Report and ITR 9. Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR 4. After conducting enquiries with reference to the foregoing issues and after verification of details furnished by the assessee the AO completed the assessment u/s 143(3) of the Act on 29.12.2016 at a total income of Rs. 12,15,42,352/-. Subsequent to completion of the assessment, the Pr. CIT issued two identically worded show cause notices (hereinafter 'SCN') u/s 263 of the Act dated 16.05.2017 and 19.07.2017 proposing to interfere with the assessment order since he found fault with the AO's order dated 29.12.2016 for the following reasons : "Subsequently, the assessment records of the assesse were called for & on the bas....
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....ehind such claim was not verified by the A.O during the course of assessment proceedings. (g) One of the criteria for selection in scrutiny was large other expenses in P&L account, even headwise break up of miscellaneous expenses of Rs. 21.56 crores was not called for by the A.O." 5. In response to the later SCN, the assessee submitted its reply dated 29.08.2017 along with several documents in support of its averments and which was made available to us at Pages 3 to 79 of the paper book. Although explanations were furnished in August 2017, the Ld. Pr. CIT passed the impugned order only on 26/02/2019, wherein he held the AO's order to be erroneous in so far as it was prejudicial to the interests of the Revenue with reference to all the issues set out in clauses (a) to (g) of SCN. In the impugned order, the Ld. Pr. CIT set aside the AO's order with respect to all the seven points inter alia directing AO to make a reference to the TPO, after obtaining the approval of the Ld. Pr. CIT, if considered necessary. Aggrieved by the order of the Ld. Pr. CIT the assessee is now before us challenging the exercise of revisionary jurisdiction by the Pr. CIT u/s 263 of the Act. 6. A....
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....enquiries which the facts of the case required the AO to make. According to Ld. Pr. CIT assessment order suffered from lack of enquiry & application of mind to the facts as also by incorrect application of applicable legal provisions to the facts of the case. As a result, in the opinion of Ld. Pr. CIT, AO's order was erroneous and therefore liable for revision u/s 263 of the Act. The said findings of the Ld Pr. CIT have been seriously contested by the appellant in Gr. Nos. 1&2. In the circumstances therefore before adjudicating the issues arising from the impugned order, we have to first examine the scope of revisional jurisdiction u/s. 263 of the Act. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the ld. CIT. The twin conditions which need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and(ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circ....
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....e Ld. Pr. CIT observed that in respect of issues set out in clauses (a), (b), (d), (f) and (g), proper enquiry was not conducted by the AO which the circumstances of the case demanded and for absence of proper enquiry, the assessment order was considered by the Ld. Pr. CIT to be erroneous and prejudicial to the interests of the Revenue. It is true that the courts have held that an order of assessment can be considered to be erroneous if there was lack or total absence of enquiry with regard to an issue which has material bearing on the assessment of total income for the relevant year. However in such a case the CIT has to first demonstrate that no enquiry at all was conducted and consequent to which not only the order became erroneous but such an error also caused prejudice to the revenue. In our considered view one also has understand the difference between "lack of inquiry" and "inadequate inquiry" and when it can be termed as erroneous for usurpation of jurisdiction u/s 263 of the Act. For better understanding of this aspect, we can take help of the judgment of the Hon'ble jurisdictional Calcutta High Court in the case of CIT Vs J.L. Morrison (I) Ltd (366 ITR 593), wherein their....
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....in do not really support his contention. The judgment in the case of Meerut Roller Flour Mills (P.) Ltd. (supra) does not apply because the High court in that case was satisfied that the assessment order was passed without enquiry. 91. The judgment of Cochin Bench of Income Tax Appellate Tribunal in ITA No. 116 /Coch/ 2012 relied upon by Mr. Nizamuddin is evidently based on an erroneous impression that "the proceedings before the Assessing Officer are judicial proceedings". This impression, which is patently contrary to the views expressed by Apex Court in the case of S.S. Gadgill (supra), was responsible for the views taken by the Tribunal. When the premise is wrong, the conclusion is bound to be wrong. 92. The judgment in the case of Infosys Technologies Ltd. (supra) is distinguishable on facts. The step taken by the CIT under Section 263 in that case was justified because the Income Tax records produced before him did not show that the assessing officer had considered the double taxation avoidance agreement on the basis whereof the claims were made by the assessee. Therefore, that was a clear case to show that the assessment order was passed w....
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.... of above total income is computed is under:" 98. Unless the aforesaid recital is factually incorrect or the computation is legally wrong, it is not possible to hold that the assessment order was passed without application of mind. On the top of that when the Assessing Officer accepted the contention of the assessee there was no occasion for him to make any discussion in his order. 99. If the assessing officer cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. The third question is, for the reasons discussed above, answered in the negative." 10. This aspect was also explained by the Hon'ble Delhi High Court in its judgment in the case of CIT Vs Sunbeam Auto Ltd (332 ITR 167). The relevant extracts of the judgment is as follows: 12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned ....
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....th a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [See :Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ****** From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the acco....
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....r to retain the accuracy. Most of the parts manufactured are for the automobile industries which have to work on complete accuracy at high speed for a longer period. Since it is an ongoing procedure, a company had produced 10,75,000 sets whose selling rates is inclusive of the reimbursement of the dies cost. The purchase orders indicating the costing includes the reimbursement of dies cost are being produced before your honour. Since the sale rate includes the reimbursement of dies cost and to have the matching effect the cost of the dies has been claimed as a revenue expenditure." 14. This clearly shows that the Assessing Officer had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dyes and tools is to be treated as revenue expenditure or not. It appears that since the Assessing Officer was satisfied with the aforesaid explanation, he accepted the same. The CIT in his impugned order even accepts this in the following words : "Assessing Officer accepted the explanation without raising any further questions, and as stated earlier, completed the assessment at the returned income." 15.....
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....he Assistant Commissioner or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; (b) "record" [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matterof any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been c....
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....ot be deemed[DCM Vs. State of Rajasthan (1996) 2 SCC 449. AIR 1996 SC 2930 (3 judges of Hon'ble Supreme Court) and same view reiterated in State of Karnataka Vs. State of Tamil Nadu (2017) 3 SCC 362. So when we look at Explanation-2, we note that deeming fiction of law that the order of the Assessing Officer is deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue only if in the opinion of the ld. CIT, which necessarily has to be a finding of fact in the following four events. Then legal consequence follows, if not, it does not. So, the CIT has to make a finding of fact in the following: (a) the assessment order passed by the Assessing Officer is without inquiry or verification, (b) the Assessing Officer allowed a claim without enquiry, (c) the Assessing Officer passed the order which is not in accordance with any order, directions or instructions issued by the CBDT u/s 119 of the Act, (d) the Assessing Officer passed the order which is not in accordance to the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court, which is prejudicial to the assessee, which is rendered either in the assessee'....
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.... principle of due process of law was recognized by the Hon'ble Supreme Court. Therefore the opinion of the Ld. CIT has to be in consonance with that of the well settled judicial principles and cannot be arbitrarily made discarding the judicial precedent on the subject. The opinion of the Ld. Pr. CIT has to be reasonable and that of a prudent person instructed in law and which founded on the correct facts borne out from records. The CIT's opinion should be based on objective consideration of material facts and not on his subjective notions of the facts wrongly presumed or inferred by him. Moreover, it has to be kept in mind that an Explanation to substantive section should be read as to harmonize with and clear up any ambiguity in the main section and should not be so construed as to widen the ambit of the section conferring powers or authority larger than what is envisaged in the principal provision. It is so held by the Hon'ble Supreme Court in Bihta Cooperative Development Cane Marketing Union Ltd. Vs. Bank of Bihar, AIR 1967 SC 389 and M/s. Oblum Electrical Industries Pvt. Ltd., Hyderabad vs. Collector of Customs, Bombay - AIR 1997 SC 3467 at page 3471 and also see Justice G.....
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.... to pass the order of assessment afresh, effectively giving the AO a second innings without establishing that the initial order was erroneous as well as prejudicial to the interests of the Revenue. In this regard, it is pertinent to refer to the observations and the decision rendered by the Hon'ble Delhi High Court in the case of ITO vs DG Housing Projects Ltd in 343 ITR 329, which is reproduced below: "19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assess....
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.... and (iii) other income (Sch. 19 of P&L account). Hence, incidence of TDS can apply only to other income, which as per the accounts was to the tune of Rs. 8.40 Crores (Rs. 873.53L less foreign exchange gain of Rs. 33.82L). Thus, even if TDS was deducted on entire other income, there was a short credit income. The same was not properly verified by the A.O." 20. In the impugned order the Ld. Pr. CIT admitted that the assessee had filed explanation but the same was not rejected summarily on the ground that the issue was not looked into nor were full facts discussed. In the course of hearing, the ld. AR drew our attention to the facts available on record which factually disproved the reasons set out in clause (a). As noted in Para 3, we find that the assessee's case was selected for scrutiny under CASS inter alia on the ground that there was a mismatch in turnover as per audit report and ITR. We note that this aspect was specifically enquired into by the AO at the time of assessment. The assessee by its letter dated 09.12.2016 [Pages 17 to 21 of paper book] had brought to the AO's attention that in fact there was no mismatch in turnover. The Ld. AR brought to our attention that in P....
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....ks for the relevant year. Although these documents and explanations were admittedly filed before the lower authorities, no factual infirmity or falsity was shown by the Ld. Pr. CIT or by the ld. CIT, DR appearing on behalf of the Revenue. The Ld. Pr. CIT set aside the assessment order on this issue merely observing that the issue was not properly examined. Applying the principles set out in Paras 8 to 17 above, we therefore hold the order u/s 263 of the Act on this issue to be unsustainable because not only did the AO had enquired into this issue but had consciously applied his mind to the facts made available before him and adopted the permissible view in law. On the contrary the Ld. Pr. CIT did not bring on record any material to disprove the assessee's explanations which showed that receipts certified in the TDS Certificates totaling Rs. 972 Lacs were fully accounted in the assessee's books of the relevant year but merely restored the issue for fresh examination by the AO. The order of the Ld. Pr. CIT with reference to issue in clause (a) is therefore set aside. Ground Nos. 3 & 4 are accordingly allowed. 22. In Ground Nos. 5 to 7, the assessee has objected to Ld. Pr. CIT's fi....
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....-tax Return in ITR-6 and Clause 23 of the TAR being materially different, and the figures reported in ITR and in Clause 23 of TAR did not match. 24. The ld. AR submitted that the CASS parameter referred only to mismatch of the figures reported in tax audit report in relation to payments made to persons referred 40A(2)(b) with the figures mentioned in income-tax return. The CASS reasons did not make reference to the 'transfer pricing audit report' furnished in Form 3CEB, as wrongly alleged by the Ld. Pr. CIT in his SCN. He therefore submitted that when the reason for selection under CASS was examined and the AO was satisfied with the explanation furnished for the same, the Ld. Pr. CIT could not justify invocation of power u/s 263on the ground that before completion of assessment reference to TPO on transfer pricing risk parameter was mandatory in terms of Para 3.2 of the CBDT Instruction No. 3 of 2016. 25. Having considered rival submissions we find merit in the ld. AR's primary contention that the SCN proceeded on the wrong presumption that the assessee's case was selected on a transfer pricing risk parameter. We note that the parameter for selection was as follows: ....
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....O's order became erroneous and prejudicial to the interests of the Revenue for not referring the assessee's case to the TPO u/s 92CA of the Act on the ground that the assessee's case came with the category of 'complete scrutiny', we note that this contention of the Ld. Pr. CIT is in fact contrary to the extant instructions of the CBDT contained in Paras 3.2 to 3.3 of Instruction No.3/2016 wherein the Board have set out the following specific situations/instances where the reference to TPO has been made mandatory : "3.2 All cases selected for scrutiny, either under the Computer Assisted Scrutiny Selection [CASS] system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard -for example. Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT). The fact that ....
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....ven suggests let alone provides that every case of an assessee selected on non-transfer pricing risk parameter but involving 'complete scrutiny', the reference must be made to the TPO if such an assessee had entered into international transactions or specified domestic transactions during the relevant year. Instead in Para 3.3 the Board has enumerated only three specific instances/ situations when the reference to TPO has been made mandatory even though as per the CASS, the case of an assessee is not selected on "transfer pricing risk parameter". We find that in the impugned order the Ld. Pr. CIT has not brought on record any material to show that the AO had acted in violation of the CBDT Instruction No. 3 of 2016 and for that reason the AO's order was erroneous and prejudicial to the interests of the Revenue. 29. Even with regard to CIT's allegation that in complete scrutiny case, the AO did not conduct any enquiries whatsoever with regard to transactions referred to in Section 40A(2)(b) as well as Section 92CA of the Act, we find that prior to completion of assessment the AO had indeed conducted enquiries with regard to CASS reason as also the assessee's international trans....
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.... the clause (i) of section 92BA of the Act, nothing was specified whether the proceeding initiated or action taken on this count can continue. Therefore, this Tribunal held that any proceeding initiated or action taken under that clause would not survive at all and any reference made to TPO under section 92CA in respect of transactions referred to in clause (i) of Section 92BA of the Act shall be invalid and bad in law. 31. Applying the ratio laid down in the foregoing decision to the facts of the present case, we note that when the impugned order was passed by the Ld. Pr. CIT, clause (i) of section 92BA of the Act had already been omitted by the Finance Act, 2017 and in that view of the matter the Ld. Pr. CIT could not set aside the order for alleged non-compliance with provision of law which no longer existed in the statute as on the date of order. The Ld. Pr. CIT's direction requiring the AO to consider making a reference to the TPO in the set aside proceedings is also contrary to the view expressed in the foregoing decision of the coordinate bench(supra). For all the foregoing reasons therefore, we hold that the AO's order did not suffer from any error for the reason that....
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....ns set out above we therefore hold that the assessment order passed by the AO in which no disallowance u/s 14Aof the Act was made, could not said to be unsustainable in law because the course adopted by the AO while passing the order u/s 143(3) of the Act was not only permissible in law but the said course was in conformity with the view expressed by the jurisdictional high court. Accordingly the impugned order of the Ld. Pr. CIT with reference to the reasons set out in clause (c) of the SCN is held to be unsustainable and accordingly set aside. Ground Nos. 8 & 9 are therefore allowed. 35. In Ground Nos. 10 to 12 the assessee has objected to Ld. Pr. CIT's finding with reference to reasons set out in Para 3(e) of the SCN which read as follows: "It is seen from clause 17 of TAR that the assesse did not take valuation of properly sold as per provisions of section 50C of the Act. However, large value sale of consideration of property reported in TDS return under section 194IA was one of the criteria for selection of the case in scrutiny. The same was not properly verified by the A.O." 36. In the impugned order the Ld. Pr. CIT considered the assessment to be erroneous for....
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....ctory was not registered by the purchaser because the Purchaser already held legal title over the land. It was explained before the lower authorities that since as per the valuation report the consideration allocated for sale of building was Rs. 8,03,94,934/-, at the time of payment, MRIL deducted tax at the rate of 1% being Rs. 8,03,950/- under Section 194-IA of the Act and issued TDS certificate in Form 16B for the said sum. Copy of the relevant TDS certificate was placed at Page 189 of the Paper book from which we note that Sale consideration from which tax was deducted was certified by the payer was Rs. 8,03,94,934/- which fully tallied with the sale consideration accounted by the assessee in it's books as also reported in it's ITR as well as TAR. The Ld. AR therefore claimed that the sale consideration of property reported in ITR and the sale consideration of property reported in TDS return u/s 194IA fully reconciled and the CASS reason was factually incorrect. He therefore submitted that the AO had accepted the assesse's explanations after verifying the relevant agreement for sale, report of the valuer, fixed asset and depreciation schedule certified by the tax auditor as als....
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....sed under the head 'Capital Gains', there was no occasion for the AO to make reference u/s 50C of the Act to the Valuation Officer for determination of fair market value of these assets. The ld. CIT, DR, on the other hand, fully supported the order of the Ld. Pr. CIT. 40. After considering the rival submissions, we find merit in the ld. AR's submissions that, for the reasons set out in Para 4.3 of the impugned order, the AO's order could not be held to be erroneous. Although in the impugned order, the AO's order was considered erroneous for not making reference to the registered valuer for determination of fair market value of the factory building, the order of the Ld. Pr. CIT is silent about the applicable legal provision in terms of which the reference was required to be made. We find that reference to the DVO or to the circle valuation adopted by stamp duty authorities would have been relevant if income arising from sale of assets was assessed or assessable under the head 'Capital Gains'. Section 50C of the Income-tax Act, 1961 contains a deeming fiction whereunder, the AO is permitted to treat the market value adopted by the stamp duty authorities to be the full value of con....
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....xplanation below Section 41(4), according to which the said term meant "the price for which it is sold". We note that in the present case the assessee's transaction involving sale of factory building being a depreciable asset, was governed by the specific provisions of Section 43(6) read with Section 41(4) of the Act and not by the provisions of Sections 45, 48 and 50C. We therefore find merit in the ld. AR's submission that the provisions of Section 43(6)(c) read with Section 41(4) of the Act did not permit the AO to substitute the actual price at which the factory building was sold with the notional market value determined by the stamp duty authority or by the DVO. In the circumstances therefore the Ld. Pr. CIT could not have considered the AO's order as erroneous for not making reference to the registered valuer for obtaining market value of the property because such notionally determined value apparently did not have any relevance for determination of total income of the assessee for the relevant year. We therefore have no hesitation in holding that for the reasons set out in the Para 4.3 of the impugned order, the AO's order could not be said to be held as erroneous and prejud....
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.... in conformity with the provisions of Section 43(6)(c) of the Act. 43. Having considered the rival submissions, we find that in the Profit & Loss Account, the assessee never debited sum of Rs. 42,93,049/- under the head 'write-off of fixed assets' nor separately claimed deduction therefore in the return of income. In the circumstances therefore when there was no claim for deduction of such an amount in the return, the issue of non-enquiry in respect of a non issue did not have any material impact and no prejudice can be said to have been caused to the interest of the Revenue because of the alleged nonenquiry. We also find that before the Ld. Pr. CIT the assessee had filed the certificate issued by M/s D.V. Agarwal & Associates, Chartered Accountant in which it was certified that the assets written off were sold during the relevant year and the loss incurred on sale was netted off against profit made on sale of other fixed assets and the net gain of Rs. 7,44,52,592/- was separately credited under the head 'Other Operating Income, and this was separately considered in the computation of income. No factual infirmity or falsity was shown by the Ld. Pr. CIT in the explanations put....
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....son set out in the impugned SCN the assessment could not have been revised under Section 263 of the Act. 47. Even with regard to the deduction allowed u/s 80IC for Rs. 34,61,750/-, we note that the assessee had claimed such deduction in respect of its two industrial undertakings situated at Haridwar and Dehradun. In support of the deduction claimed the assessee had filed reports of the accountant in prescribed Form 10CCB, copies of which were placed at Pages 111 to 118 of the paper book. The assessee had also filed copies of the stand-alone accounts of the eligible units for the relevant year which are available at Pages 209 to 212 of the paper book. In the stand-alone accounts, the assessee had credited Rs. 31.99 lacs and Rs. 2.62 lacs under the head 'Other Source' which represented scraps sales effected by the eligible units at Haridwar and Dehradun respectively. Since the foregoing receipts were generated from the operations of the industrial undertaking, in the audit report furnished the accountant had considered the said scrap sales as income derived from the operations of the eligible undertaking and the same was included as part of the profits eligible for deduction u/s 8....
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....as 9.578%. According to Ld. Pr. CIT however such comparison may not always be correct and the expenses for earning income should have had direct connection with the business activities. According to him the record showed that the documents related with the expenses linking with the business activity were not present in the assessment records and therefore he was of the opinion that the issue was not properly verified by the AO and also the assessee did not file the relevant document with proper evidence during the course of assessment. 50. In the course of hearing the ld. AR in the first instance pointed out that one of the CASS reason for selection of scrutiny was "large other expenses claimed in the P&L A/c". He pointed out that 'Other Expenses' debited in the P&L A/c inter alia included 'Misc Expenses' of Rs. 21.56 crores. He submitted that with reference to such CASS reason the assessee's explanation was called for by the AO and the same was submitted before the AO vide assessee's letter dated 09.12.2016, copy whereof is at Pages 17 to 21 of the paper book. It was brought to the AO's attention that the increase in the expenditure debited under the head 'Other Expenses'....
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....e Ld. Pr. CIT. Having considered the submission and the facts revealed by the audited accounts, the AO was prima facie satisfied that the 'Other Expenses' claimed were commensurate with the revenue of the assessee and therefore did not draw any adverse inference. We note that under the broad head of 'Other Expenses', Rs. 21.56 crores was included under the head Miscellaneous Expenses, break-up of which was never called for by the AO. However merely because the AO did not call for further break-up of the said sum cannot by itself make the assessment order to be erroneous unless the Ld. Pr. CIT was able to show as to how non-verification of item-wise break-up resulted in prejudice being caused to the Revenue. We note that in response to SCN, the assessee had furnished before the Ld. Pr. CIT complete break-up of the expenses debited under the broad of Miscellaneous Expenses and copy thereof was placed before us at Page 79 of the paper book. On perusal of the said statement we note that the expenses clubbed under this broad head represented expenses such as annual general meeting expenses, security service expenses, books and periodicals, audit fees etc. which are incurred by any corpo....