TaxTMI 
TaxTMI 
2020 (9) TMI 816
X X X X Extracts X X X X
X X X X Extracts X X X X
....tly holding that the subjected assessment order passed on dated 29.12.2017 was without making proper enquiries. Such finding and the assumption of jurisdiction, both are contrary to the provisions of law and facts on record. Hence the proceedings initiated u/s 263 of the Act and the impugned order dated 19.03.2020 kindly be quashed. 3. That the learned Pr. CIT-3 Jaipur erred in law as well as on the facts of the case in setting aside the assessment order dated 29.12.2017 with reference to all the following issues, merely on suspicion, surmises & conjectures, and in wrongly alleging lack of proper enquiry and non-application of mind by the AO which is nothing but a pretense. The subjected assessment order is neither erroneous nor prejudicial to the interest of the Revenue nor it has been shown so: i) Alleged short offer of coaching fee revenue by Rs. 2.20 crore for taxation out of total surrender of Rs. 3.00 crore during the course of survey. ii) Alleged abnormal increase in salary, Celebration, legal and rent expenses iii) Alleged various expenses of Rs. 3,34,500/-in violation of section 40A(3). iv) Alleged non-verification of claim of depreciation on computer and furnitu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow cause notice issued by Pr. CIT -3 is also reproduced herein below: - 2. Perusal of the assessment record reveals the following issues which the AO has not verified: 1. A survey action vide u/s 133A of the Act was carried out in this case on 19.02.2015 wherein the assessee company offered a sum of Rs. 3.00 Crs., for taxation out of the surrendered amount the assessee recorded Rs. 2,20,00,000/- as coaching fee advance under the head revenue from operation. 2. Accordingly, the assessee has offered only Rs. 20,09,434/- out of surrendered Rs. 3.00 Crs., in the computation of total income and Rs. 59,90,566/- as coaching fees (JEE-surrendered) under the head revenue from operation. 3. There is an abnormal increase in salary & wages, celebration & festival expenses, legal & professional charges and rent for which the case was converted into complete scrutiny. No determined addition was made under these heads except a lump sum addition of Rs. 6,00,000/- 4. Salary expenses have been allowed without obtaining any details of qualification, nature of duty performed etc. Similarly student healthcare and welfare expenses of Rs. 5,00,000/- have been allowed without verification. 5. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act. 14.The AO has not verified the amount of Rs. 45,85,897/- under the head "Staff Payable". 15.The AO has not at all verified all the issues enumerated from (1) to (14) and has not asked for the reasons for substantially high expenditure debited in the Profit & Loss Account. 3. Necessary powers have been conferred upon the undersigned by the Income Tax Act, 1961 Act to review the assessment made by the assessing officer if the order passed by the assessing officer is found to be erroneous in so far as it is prejudicial to the interest of revenue. Further the Explanation (2) to Section 263, which was inserted by the Finance Act, 2015 w.e.f. 01.06.2015, provides and reads as follows:- " For the purpose of this section, it is hereby declared that an order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Principal Commissioner or Commissioner,- 1. The order is passed without making inquiries or verification which should have been made; 2. The order is passed allowed any relief without inquiring into claim." 4. In view of the above, I am of the opinion that the assessment order dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e has been subjected to the scrutiny assessment under section 143(3) of the Act. The AO in his order passed under section 143(3) of the Act has stated that survey has been conducted wherein the assessee has surrendered an amount of Rs. 3.00 crore which has been offered to tax in the return of income. Our attention was invited to the notice issued by the A.O. under section 143(2) on 13.04.2016, and consequently notice u/s 142(1) along with questionnaire was issued on 5.06.2017. Another notice u/s 142(1) of the Act alongwith detailed questionnaire was issued on 20.12.2017 upon conversion of case from limited scrutiny to complete scrutiny in addition to queries/clarification/documents sought during personal hearing(s) and assessee company's submissions were examined. 6. The ld AR has further contended that the A.O. had made sufficient inquires and also considered the material placed during the course of survey and the surrender made by the assessee and after considering all these things, framed assessment U/s 143(3) of the Act. As per the ld AR the proceeding u/s 263 is a step to start again a second scrutiny/investigation of facts without there being any material to hold even pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and various other judgements on the issue the assessment order passed by A.O. cannot be treated as an erroneous and prejudicial to the interest of revenue. In the case of CIT Vs. Vodafone Essar South Ltd. (2013) 2012 Taxman 184 Hon'ble Delhi High Court held that assessing officer before passing assessment order made an enquiry and directed his mind on all aspects. View adopted by him was clearly one among two plausible views that could have been taken. Commissioner did not specifically furnish any reasons to say why original order was unsupportable in law. Commissioner could not have validity exercised his revisionary power u/s 263 in instant case. 7. Reliance was placed by the ld AR on the decision of Jurisdictional Jaipur bench of ITAT in the case of Vinay Kumar Sogani ITA No. 444/JP/2018 Date of Pronouncement: 26/07/2018 (Held : ..once the assessee has produced evidence which established the genuineness of the transaction being holding of shares by the assessee in the demat account and purchase of the shares against the consideration paid through banking channel then in the absence of bringing any contrary fact or disapproving the evidence produced by the assessee, the mer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elf decided that the order is erroneous by conducting necessary enquiry if required and necessary, before the order under section 263 is passed. In such cases the order of the AO will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of income-tax cannot remand the matter to the AO to decide whether the findings recorded dare erroneous. In cases where there is inadequate enquiry but not lack of entry again the CIT must give and record a finding that the order/enquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the AO making the order unsustainable in law/ In some cases possibly though purely the CIT can also show and establish that the facts on record or inference drawn from facts on record as per as justified and mandated further enquiry or investigation but the AO had erroneously not undertaken the same/ However the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the AO to conduct further enquiries whether a finding that the order is erroneous.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vey and also paid taxes thereon. However, while framing the assessment, the A.O. has not considered the net income offered by the assessee nor the amount of tax which have already been paid by the assessee during the course of survey. 10. The ld CIT-DR has further contended that the investment made in the construction was not examined by the A.O. while framing the assessment in so fact as no enquiry was raised with regard to huge construction expenditure so incurred by the assessee nor the capital work in progress was examined. Our attention was invited to the opening balance under the head building, work in progress and the closing balance which was not matching with the figure given in the balance sheet. As per the ld.DR increase in cash in hand as compared to the cash found during the course of survey was not looked into. As per the ld DR, explanation 2 is clearly applicable. 11. We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that the assessee was subject to survey U/s 133A of the Act on 19/02/2015 wherein the assessee company has surrendered amount of Rs. 3.00 crores. Subsequently, the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vi) Outstanding liabilities in sundry creditors for advertisement and rent expenses and staff payable vii) Alleged non-verification of construction in building and non-reconciliation of trial balance viii) Alleged non-application of provisions of section 68 to 69D read with section 115BBE In reply to these queries of the ld. Pr.CIT, the assessee has filed detailed submission. From the record we found that during the course of the survey action u/s 133A of the Act on 19.02.2015, while recording statement u/s 133A, Mr. Rajesh Kularia Director of the company offered a sum of Rs. 3.00 crore. The said offered amount was duly declared and tax was paid thereon as per detail hereunder Particulars Amount Head/Group of Inclusion Coaching Fee Advance 2,20,00,000/- Receipts from Students- forming part of Revenue from Operation Coaching Fee JEE 59,90,566/- -do- Additional income over and above incorporated in books of account. 9,27,519/- Plus Rs. 10,81,615/- i.e. Rs. 20,09,434/- Computation of total income Total 3,00,00,000/- Thus, we found that the aforesaid amount of Rs. 3.00 crore have already been acknowledged as declared by the assessee company, in the par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e from operation and would have been shown in the accounting head of Current liability as per accounting policy adopted by the assessee company. Thus, the amount of Rs. 2.20 crore being part of offered income during the course of survey action, has been duly offered by assessee to tax in the return of income filed for the year. 17. We also gone through the reply of the assessee to the questionnaire dated 20-12-2017, detailing nature and implication of impounded documents during survey proceedings. As per sub para a) to d) of para 6 of the said reply letter, nature and implication of the impounded papers vide Annexure A-1 to A-6 were explained. On perusal of the said reply as well as in reply to question no. 21 of the statement recorded u/s 133A , it is verifiable that out of the offered income of Rs. 20,09,434/- in the computation of total income Rs. 9,27,519/- was offered on account of reconciliation difference of service tax component between books of accounts and fee collection details and remaining amount of Rs. 10,81,915/- i.e. Rs. 20,09,434 minus Rs. 9,27,519/- was offered to meet the remaining amount of offer of Rs. 3.00 crore in the statement recorded of Mr. Rajesh Kularia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....address, Qualification, Permanent Account Number, Gross salary paid/credited during the year, mode of payment and outstanding salary at the end of year was also filed before the ld. Pr.CIT in support of the salary expenses. The details are verifiable with corresponding detail filed during the course of assessment proceedings, containing name of employee and respective annual salary thereof. As such no adverse inference needs to be drawn merely on the basis of non-availability of detail of qualification and nature of duty since the salary expenses details were examined by the AO with related details as per books of accounts produced during assessment proceedings. 22. With regard to ld. Pr.CIT's observation regarding celebration and festival expenses, which was found by the ld. Pr.CIT that there is abnormal increase in celebration and festival expenses and no determined addition was made consequent upon conversion of limited scrutiny to complete scrutiny. In this regard we observe that during the year under consideration the said expenses incurred of Rs. 20,84,356/- in comparison to corresponding expenses Rs. 16,25,322/- in the preceding assessment year. In terms of amount, increase....
X X X X Extracts X X X X
X X X X Extracts X X X X
....minus 16.50 lacs i.e. Rs. 1.26 lacs was on account of annual 5 percent increase of lease rent of Institute Building. A table showing name of landlord, address of rented premises, rent amount for the whole year and TDS deducted thereon was placed on record. We also observe that the said details along with confirmation of the respective land lord of premises running on rent at Sikar were also filed along with reply letter to the questionnaire dated 20-12-2017 Name of Landlord Address of rented premises Purpose of use Amount of Rent TDS Amount Jagpal Singh HUF Jyoti Nagar Piprali Road Sikar Class room coaching building ½ portion 12,00,000/- 1,20,000/- Smt. Mamkaur Jyoti Nagar Piprali Road Sikar Class room coaching building ½ portion 12,00,000/- 1,20,000/- Gurukripa Career Institute Jyoti Nagar Piprali Road Sikar Office and Class room coaching building 26,46,000/- 2,64,600/- Om Prakash Narula, Plot No. 1 Near Ambedkar Circle Scheme No.3 Alwar Class room coaching and office 1/3 Portion 5,50,000/- 55,000/- Rajkumar Narula -do- -do- 5,50,000/- 55,000/- Ramesh Chandra Narula -do- -do- 5,50,000/- 55,000/- Total 66,96,00....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und that the festival expenses of Rs. 37,500/- and 34,000/-was incurred on the festival of Deepawali to non-teaching staff and casual workers like, sweeper, postman, electrician from JVVNL etc. The details of said payment with name and amount was forming part of the voucher of payment and was duly examined by the Tax Auditor as well as by the AO during scrutiny assessment. Individual payment to said payees is not exceeding Rs. 1000/- per payee and the same is evident from the copy of voucher produced with supporting detail. We also found that each cash payment exceeding in violation of the provisions of Section 40A (3) was duly verified by the AO and that's why addition u/s 40A (3) of the Act was made in the assessment order on account of the payment of electricity bill of Rs. 2,69,205/- made in cash to JVVNL. 30. In the show cause notice, the ld. Pr.CIT also alleged that deprecation on furniture and computers was allowed as claimed in the return of income without any verification. The said observation is far away from the details filed and available on assessment record of the assessee company. Vide its 3rd reply letter to the questionnaire dated 20-12-2017, assessee company had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of possible personal use of motor vehicle (BMW Car) and telephone/mobile expenses. 34. The ld. Pr.CIT has also alleged that that there is abnormal increase in cash in hand from Rs. 81,43,641/- on the date of survey to Rs. 2.17 crore as on 31.03.2015 has not been verified. In this respect we observe from the record that the assessee company had submitted that said increase in cash was on account of amount offered and accounted for in the books of accounts of Rs. 2.20 crore under the head Coaching Fee(advance). The said offered income was recorded in the books of accounts post survey proceedings and offered to tax. Further cash book for the entire period of the assessment year was produced and also examined by the AO. Therefore, we do not find any merit in the observation of the ld. Pr.CIT that there is abnormal increase in cash and no justification was offered by assessee company. Further monthly summary of cash books having month-wise opening balance, receipts, payments and closing balance for the year under consideration was also filed before the Ld. Pr.CIT-3. 35. From the record, we also found that during the year under assessment advertisement expenses of Rs. 1.93 crore were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the ld. Pr.CIT that there is increase in cash balance, in this regard we found that cash balance of Rs. 2.16 crore as on 31-03-2015 was arising out of the offered amount of Rs. 2.20 crore and Rs. 59.91 lacs during survey proceedings. The said cash balance duly reflected in the cash book produced during the course of assessment proceedings. The cash balance at the end of the year of Rs. 2,16,59,171/- was lying at Sikar (inadvertently in grouping to the audited financial statements, written as Jaipur) and at Alwar Rs. 50,012/- The assessee company is not having any business activities at Jaipur. 40. The ld. Pr.CIT has also alleged that investment in building construction at Hanuman Nagar Sikar (JEE Coaching Building) as accepted in the statement of Mr. Rajesh Kularia Director of the company in reply to question no. 18 has not been examined by the AO. The said allegation is far away from facts of the case. From the reply of the said question it is very much apparent that the construction expenses of Rs. 2,71,04,786/- incurred up to 19-02-2015 was from trial balance forming part of the accounts. The said expenditure was already duly recorded in the books of accounts and detail of c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2017 i.e. applicable from the A.Y. 2017-18. As such the assessable income of the assessee company has been rightly taxed as per applicable provisions of Section 115BBE for instant A.Y. 2015-16. For this purpose we place reliance on recent decision of Hon'ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. v. Commissioner of Income-tax, [2020]114 taxmann.com 91 (Kerala), wherein it was held as under:- Section 115BBE, read with sections 68, 71 and 263, of the Income-tax Act, 1961 - Tax on income referred to in section 68 to section 69D (Set of loss) - Assessment year 2013-14 - During year, assessee filed its return of income and claimed set off of carried forward loss (unabsorbed portion of depreciation) - Same was allowed - Principal Commissioner invoked revision under section 263 on ground that assessee's income included deemed income being unexplained cash credit under section 68 which is not classified under any heads of income under section 14; therefore, set off of brought forward loss against this deemed income was not correct-Whether amendment brought in section 115BBE(2) by Finance Act, 2016 whereby set off of losses against income referred to in se....