TaxTMI 
TaxTMI 
2018 (10) TMI 1922
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....6 u/s 263 of the Act to the assessee, which reads as under:- "3. Perusal of the assessment record reveals that the company has received Rs. 6,19,71,580/- claimed to be on account of share premium [as reflected in part-A(l)(b)(iv) (Balance sheet as on 31s t day of March.2012)]. The AO vide the questionnaire issued on 20.01.2014 had requested you to furnish a list of shareholders alongwith share premium paid by each shareholder alongwith documentary evidence. But no such list was provided by you during the assessment proceedings. While completing the assessment, the AO has also not properly verified/examined the genuineness of sources of these amounts claimed to be share premium by you. 3.1. During assessment proceedings, the statement of one Shri Raja Devinder Singh was recorded in which he has admitted that he has invested total amount of Rs.l,12,50,000/- during the F.Y. 2011-12 in M/s City Beautiful Hotels & Resorts Pvt. Ltd. However, the AO has not made discreet enquiries regarding genuineness of the huge premium paid (Share Capital amount Rs. 1,18,420 whereas share premium amount of Rs. 1,11,31,580), source, of investment and huge transactions reflected in the ....
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.... v) Details of taxes deducted at source and proofs of having remitted them to the Government account within the prescribed time. vi) Basis of valuation of closing stock reflected in the balance sheet. vii) Details of movable/immovable assets. No reply, to the above queries had been filed by you. Even the Assessing Officer did not raise any question regarding these issues subsequently during the assessment proceedings. Thus, the above issues remain unexamined on the part of the Assessing Officer and unexplained on the part of assessee. 7. In view of the facts stated above, it is held that the assessment framed u/s 143(3) on 31.03.2015 is erroneous in so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Income Tax Act, 1961 including Explanation 2 inserted by the Finance Act, 2015 w.e.f, 01.06.2015. You are, therefore, requested to show cause as to why assessment framed vide assessment order dated 31.03.2015 u/s 143(3) of the Income Tax Act, 1961 should not be cancelled by invoking the provisions of section 263 of the Income Tax Act, 1961." 3. In response to the notice, the Ld. counsel for the assesse....
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....2 dated 19.08.2015 (Chd Trib). iii) CIT Vs. Nirav Modi, ITA No.119/2014 dated 16.06.2014 (Bom HC). 3.1.4 As mentioned in the show cause notice, during the assessment proceedings, the assessee was required to furnish certain documents including details of shareholders and premium paid etc., however, no such information was provided by the assessee in a proper manner for making verification by the AO. Even the AO had not made any discreet enquiry to verify the genuineness and source of investment received and the huge transactions reflected in the bank statement of Sh. Devinder Singh immediately before making payment of share premium. Hence, the case of the assessee falls under explanation 2(a) of Section 263 inserted w.e.f. 01.06.2015 which reads as under: - "Explanation 2. - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or verification which should have been made (b) ............. ....
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.....5 above, the AO had failed to make the necessary enquires to verify the genuineness and authenticity of the sources of investment etc. Therefore, this issue also remains unexamined. 3.4 Regarding issue of unassesed queries raised in the questionnaire dated 20.1.2014 (para 6 of the notice u/s 263) 3.4.1 The reply of the assessee dated 03.02.2017 on the above issue and observations of the undersigned are discussed as follows :- i) The assessee submitted that there was not related business concern with which the assessee had carried out business transaction and that this was conveyed during assessment proceedings ii) The list of sundry debtors and creditors was provided by the assessee. This needs to be verified to check genuineness of the transactions. iii) The assessee submitted that the food cost ratio fluctuated due to change in market trends, change in turnover levels, increase in price of raw food items and competitive relevant market. The assessee has not submitted any documentary evidence therefore it cannot be stated to be an authentic explanation unless duly verified. This also needs to be verified. iv) On the i....
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....ithout specifically pointing as to what further enquiry was required by the Assessing officer to be conducted in this case and even without pointing out any lacuna or defect in the details furnished by the assessee from where he could gather that the Assessing officer had committed the error while appreciating the evidence and details furnished by the assessee, which has caused prejudice to the interest of Revenue, has wrongly set aside the assessment order passed by the Assessing officer. The Ld. counsel has invited our attention to page 50 of the paper book, which is copy of the letter dated 25.2.2014, addressed to the Income Tax Officer whereby the assessee has furnished the details of unsecured loans alongwith confirmations by the payers, copy of accounts, copy of bank statement, PAN number and addresses of the parties alongwith certain other details as required by the Assessing officer were also furnished. The Ld. Counsel has further invited our attention to page 79 of the paper book which is a copy of the letter dated 14.10.2014, whereby the assessee had furnished the statement of account, confirmation of Royal Kattha Industries from whom the assessee had taken unsecured loan....
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....inting out any defect in the explanation given by the assessee has simply opined that more verifications and discreet inquiries were required to be made by the Assessing officer. In our view, the Ld. PCIT, simply writing that the Assessing officer was required to made more inquiries without making or causing to make any enquiry himself and without pointing out as to what further enquiry which the Assessing officer was required to be made and how without those inquiries the order of the Assessing officer was erroneous and prejudicial to the interest of Revenue, could not have simply set aside the order of the Assessing officer. In this respect, we deem it fit to reproduce the provisions of section 263(1) of the Act: "Section 263(1) in The Income- Tax Act: (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, 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 ....
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....icial to the interest of revenue, the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of revenue. The relevant part of the aforesaid order of the Tribunal is reproduced as under:- "30. The assessee had filed various replies to the ld. PCIT in response to notice u/s 263 of the Act stating that all the issues raised by the ld. PCIT have been examined by the AO during the course of assessment. The ld. PCIT has ignored the replies of the assessee. He merely states that 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 ld. PCIT has merely remitted the matter back to the ITA No. 3205/DEL/2017 AO without making any enquiry himself. The ld. PCIT has mentioned that the fresh loans have not been examined by the AO. The ld. PCIT 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 u/s 263 of the Act have been totally ignored. No enquiry h....
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....TA No. 165/Ahd/2018 reported in TS-443-ITAT 2018 (Ahd) has held that the Explanation being clarificatory would not lead to dilution of the basic requirements of Section 263(1) of the Act. The provisions of Section 263 although appears to be of very wide amplitude and more particularly after insertion of Explanation 2, but cannot possibly mean that recourse to Section 263 of the Act would be available to the Revisional Authority on each and every inadequacy in the matter of inquiries and verification as perceived by the Revisional Authority. The Revisional action perceived on the pretext of inadequacy of enquiry in a plannery and blanket manner must be desisted from. The relevant part of the order of the Tribunal is reproduced as under:- "9. The Pr. CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by the Finance Act, 2015 w.e.f. 1.6.2015 for this action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed b....
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....ion being clarificatory would not lead to dilution of the basic requirements of Section 263(1) of the Act. The provisions of Section 263 although appears to be of a very wide amplitude and more particularly after insertion of Explanation 2 but cannot possibly mean that recourse to Section 263 of the Act would be available to the Revisional Authority on each and every inadequacy in the matter of inquiries and verification as perceived by the Revisional Authority. The Revisional action perceived on the pretext of inadequacy of enquiry in a plannery and blanket manner must be desisted from. The object of such Explanation is probably to dissuade the Assessing officer from passing orders in a routine and perfunctory manner and where he failed to carry out the relevant and necessary inquiries or where the AO has not applied mind on important aspects. However, in the same vain where the preponderance of evidence indicates absence of culpability, an onerous burden cannot obviously be fastened upon the AO while making assessment in the name of inadequacy in inquiries or verification as perceived in the opinion of the Revisional Authority. It goes without saying that the exercise of....