TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 988
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.... engaged in the business of construction and selling of residential flats. The return of income of assessee for AY 2014-15 was subjected to scrutiny assessment and consequently, assessment order was framed under s.143(3) of the Act. The AO simply accepted the income returned at Rs. 3,73,08,493/- as assessed income without any adjustment whatsoever by a brief and a non-descript order. On verification of assessment records, the Pr.CIT found that the assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue. The Pr.CIT accordingly invoked revisional jurisdiction conferred under s.263 of the Act to show cause the assessee on the alleged infirmity in the assessment order which is broadly narrated hereunder for ready reference: "Sub: Show cause notice u/s. 263 of the I.T. Act, 1961 for A.Y. 2014- 15-regarding- Please refer to the above. 2. In this case, the return of income for A.Y. 2014-15 was filed on 30/09/2014 showing total income of Rs. 3,73,08,493/- and the assessment was completed vide order u/s.143(3) of the I.T. Act, 1961 dated 16/11/2016 by the DCIT, Circle-4(1)(1), Ahmedabad, accepting the returned income. 3. From perusal of the P&L ....
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....to have verified and ascertain bonafides and proper enquiry ought to have been made for such whopping amount claimed as revenue expenses and remaining outstanding for payment. For assumption of revisional jurisdiction, it was thus essentially the case of the Pr.CIT that the AO has inappropriately accepted the bonafides of such large and disproportionate pending expenses summarily without making any requisite enquiry in this regard. In the revisional order, the Pr.CIT observed that out of 42 flats in the project, 40 flats were already sold till 31.03.2014 while massive expenditure of Rs. 4.94 Crores remains outstanding without payment out of total construction expenses of Rs. 13.62 Crores. The pending expenses thus nearly work out to 36% of the total direct expenses which is shown to be outstanding vis-à-vis sale of flats exceeding 90% of the total inventory. Contextually, the Pr.CIT also observed that BU permission was granted w.e.f. 05.10.2013 and therefore two of the three projects were completed six months prior to the end of the year and 3rd wing of the project stood completed within next three months. In the circumstances, 36% of the expenses remaining outstanding in su....
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....nses, ledger copies and details of pending expenses were annexed before the AO. The learned senior counsel submitted that the issue involved towards pendency of so called large expenses is a pure fact related issue where the AO has taken a view based on appreciation of material placed before him. It was thus contended that the Pr.CIT was not entitled to substitute his opinion in place of the AO and allege inadequate enquiry and consequent revisionary action. In relation to scope of Section 263 of the Act, the learned AR referred to the decision of the co-ordinate bench of Tribunal rendered in the case of Smt. Minal Nayan Shah vs. Pr.CIT [2019] 111 taxmann.com 516 (Ahmedabad-Trib.) for the proposition that the revisional jurisdiction cannot be invoked to correct each and every type of mistake or error committed by the AO. A view which is legally plausible and adopted by the AO cannot be disturbed merely on the ground of existence of other possible view. It was contended that a plausible view admitted at assessment stage in exercise of quasi-judicial function cannot be dislodged in a light hearted manner in the name of inadequacy in enquiries or verification as perceived in the opini....
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....endent enquiry is discernible to have been carried out at all and details whatever, has been filed by the assessee has been simply kept in file as a formality. 8.2 The order sheet recorded by the AO was thus claimed to be totally incoherent and inadequate and does not give any indication about the nature of enquiry carried out on the details filed by the assessee. The assessment order also remains silent on the material aspects of the assessment. 8.3 It was next contended that the department has no right to file any appeal on such arbitrary expeditions of AO on material aspects seriously affecting the resultant taxable income. The Pr.CIT thus had no choice except to the exercise of power under s.263 of the Act. It was contended that the instant case is not merely a case of lesser degree of enquiry on pertinent point but a case where no objective application of mind has been applied by the AO at all. Such assessment order without putting any efforts and application of mind cannot be said to have been passed in discharge of quasi-judicial function and is unworthy of reliance. The learned CIT.DR made reference to the decision of the co-ordinate bench of Tribunal in Gayatri Enterpris....
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.... the concerned Pr.CIT/CIT to review the records of any proceedings and order passed therein by the AO. It empowers the Revisional Commissioner concerned to call for and examine the records of any proceeding under the Act and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, then he may (after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary), pass such order thereon as the circumstances of the case justify, including the order enhancing or modifying the assessment or cancelling the assessment and directing afresh assessment. Thus, the revisional powers conferred on the Pr.CIT/CIT under s.263 of the Act are of very wide amplitude with a view to address the revenue risks which are objectively justifiable. 9.2 In the facts and circumstances of the case, the substantive issue that emerges for adjudication is whether the Pr.CIT under the umbrella of revisonary powers is entitled to upset the finality of assessment proceedings before the AO where the AO has allegedly committed error in passing assessment order without proper verific....
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....l conduct of a responsible statutory functionary. Pertinent here to say, the proceedings before the AO are quasi judicial proceedings and all the incidents of such proceedings are expected to be observed without laxity before the result of the proceedings are determined. The Pr.CIT has demonstrated the existence of definite cause of action for enquiry in unequivocal terms when seen contextually. The Pr.CIT in discharge of its solemn duty under s.263 of the Act could not remain oblivious of the fact objectively drawn. 9.4 Having regard to the sweeping conduct of the AO in finalizing the assessment without making requisite enquiry on the abnormal character of outstanding expenses having direct bearing on the assessed income, there appears to be an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 of the Act which are of wide amplitude. As narrated, the circumstances clearly existed which demanded enquiry which was not done by the AO while discharging its statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. While holding so, we alive to the plea on behalf of the asse....