TaxTMI 
TaxTMI 
2021 (9) TMI 457
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....sessment order and has further erred in restoring back to the AO to pass fresh assessment order with the following direction : (a) To make reference to TPO for computation of ALP after approval of PCIT as required u/s 92CA in respect of International Transaction of Rs. 2.87 crores with AEs and obtain report form him, thereafter modify the assessment order by making such addition. The ld. PCIT had failed to appreciate that the ld. AO had made total disallowance of such amount in the assessment order and matter was pending in first appeal. (b) To examine as to how and when such assets of Rs. 240.75 crores were acquired and installed accordingly take appropriate action for making disallowance of claim of deduction or part of claim of deduction u/s 32AC of the IT Act. The ld. PCIT had no firm conclusion that any addition made was not verifiable and there was only a suspicion or surmises. (c) To examine from records of the assessee and form books of accounts and documentary evidences and find out as to whether claim of deduction of Rs. 300860481/- as made u/s 35(1)(iv) of the IT Act includes any expenditure on acquisition of land after 29.2.1984 or not. Furthe....
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....d even if one of the condition is absent recourse cannot be had to the provisions of section 263. 4. The assessee pleaded that in the light of the law declared by the Hon'ble Supreme Court in the case of Malabar none of the grounds stated in the impugned notices constitute a valid ground or basis for the lawful assumption of jurisdiction u/s 263 of the Act. A perusal of the impugned notice issued reveals that the provisions u/s 263 of the Act has been proposed to be invoked on the solitary ground that the Assessing Officer has not made proper inquiries during the course of assessment proceedings without bringing on record any finding or pointing out any material as to how the assessment order is erroneous and has caused loss to the revenue. 5. The assessee further pleaded that a bare statement to the effect that the AO has not done proper inquiries per se doesn't constitute a valid basis for assuming jurisdiction u/s 263 of the Act. It is a settled law that the provisions of section 263 cannot be invoked on mere presumptions or suspicion that an inquiry might have unearthed any escaped taxable income as held by the Hon'ble Delhi High Court in its judgment in the case of CIT v....
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....e conclusion that the Assessing Officer has not applied his mind. The assesse for the aforesaid proposition of law places reliance on the decision by the Hon'ble Delhi High Court in the case of CIT Vs. Vikas Polymers (2010) 236 CTR (Del) 476 wherein it has been observed that "A bare reiteration by him that the order of the ITO is erroneous in so far as it is prejudicial to the interest of the Revenue, will not suffice. If a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. 9. The assessee further relied on the case CIT v. Sunil Sankhla (2019) 411 ITR 437 (Raj.)(HC), the Hon'ble Jurisdictional High court where it was observed that theCommissioner passed the revision order on the ground that the AO has passed the order without verification. Tribunal held that the AO has passed the order after examining the details and the financial statements had accepted the business profit declared by the assessee and had adopted a view that the order pass....
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....istration of the Income-tax Act, the Board has decided that the AO shall hence forth make a reference to the TPO only under the circumstances laid out in this Instruction. 12. 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 para meters [in respect of internationall 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 a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are invariably available with the jurisdictional AO. Thus, if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily ref....
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....e books of accounts and vouchers were submitted before him for verification and he did not draw any adverse inference therefrom. 16. In regard to the claim u/s 80IA and 80IB, the assessee submitted form 10CCB, which is on record. In so far as deduction u/s 80JJA, the assessee submitted form 10DA which is on record. The assessee further submitted that the AO during the course of assessment proceedings and when the books of accounts and vouchers were submitted before him for verification did ot agree with the assesse's submission and disallowed the claim u/s 80IA on CPP unit and 80IB on Jammu unit as discussed by him in the assessment order framed for the year and therefore PCIT to say that AO did not apply his mind is contrary to the facts on record. Each head of the expenses was verified by the Ld AO during the course of assessment proceedings and when the books of accounts and vouchers were submitted before him for verification and he did not draw any adverse inference therefrom. 17. In regard to the claim u/s 32AC on account of investment in new plant and machinery is concerned, the assessee submitted that the assesse claimed a deduction of Rs. 36,11,30,696 being 15% of the....
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....rse of assessment proceedings. In any case there is no prejudice to the revenue, rather the assessee has a grievance that such bonafide claim had been rejected. Therefore selectively picking up the issues against the assessee, is against the principles of natural justice. 20. In regard to the claim u/s80IB for Rs. 1,09,64,103, the assessee submitted that the report in form 10CCB was filed with the AO and is on record. The AO after thorough examination of the books of accounts and vouchers submitted to him, restricted the claim to Rs. 1,09,48,888 with a disallowance of Rs. 15215/-. The mere fact that the claim was modified by the AO clearly establish the fact that AO has in fact considered all the submissions very carefully and each and issue was minutely examined by him in the course of assessment proceedings. Therefore selectively picking up the issues against the assessee is against the principles of natural justice. 21. In regard to claim u/s 35(1)(iv) of the Act, the assessee submitted that it made expenditure of capital nature of Rs. 3008.60 lacs on scientific research related to the business carried on by the assessee. The R&D facility is duly approved by DSIR and copy ....
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....n and assessee'sreply to the PCIT and the original assessment order and are of the view that the assesseehas furnished all information as asked for by AO during the course of assessment proceedings and which have been duly considered by him as evident from the assessment order. The AO had issued detailed questionnaire raising various issues which were also replied by the assessee from time to time. The assessee had also appeared personally and filed the detailed replies to all the queries raised and books of accounts were also produced. We also find that even on the issues on which the addition had been made by AO in the assessment order are subject matter of 263 proceedings, which by no means can be regarded as erroneous or prejudicial to the interest of revenue. The PCIT has failed to specify as to how and on what ground the assessment order is erroneous and/ or which part of the CBDT instructions were not adhered to by the AO. Merely not recording the satisfaction, the AO on the records does not make the assessment order erroneous and prejudicial to the interest of revenue, as is decided in the various judicial pronouncement by various courts. We have also perused Instruction no....
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.... to be preceded by some minimal inquiry. In fact, if the Principal CIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the Principal CIT to conduct such inquiry. All that Principal CIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that "in the case of the assessee-company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular No. 9 of 2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue. This can hardly constitute the reasons required to be given by the Principal CIT to justify the exercise of jurisdiction under s. 263. In the context of the present case if, as urged by the Revenue, the assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the Principal CIT to undertake an inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds during the assessment year in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciati....
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....hat the reply has been filed by the assessee but he nowhere discusses the contentions raised by the assessee and why he does not agree with the contentions of the assessee. The learned Principal CIT has merely remitted the matter back to the AO without making any enquiry himself. The learned Principal CIT has mentioned that the fresh loans have not been examined by the AO. The learned Principal CIT has not considered the contentions of the assessee that there is no fresh loan. Similarly, the other replies of the assessee filed during the course of assessment and in response to notice under s. 263 of the Act have been totally ignored. No enquiry has been made by the learned Principal CIT. It was incumbent for the learned Principal CIT to make some minimum independent enquiry to reach to the conclusion that the order of the AO is erroneous and prejudicial to the interest of revenue. The reliance is rightly placed on the decisions of Delhi High Court in learned Principal CIT vs. Delhi Airport Metro Express (P) Ltd. (supra) and ITO vs. DG Housing Projects Ltd. (supra). The Hon'ble Delhi High Court in Delhi Airport Metro Express (P) Ltd. (supra) has made the following observation: ....