TaxTMI 
TaxTMI 
2022 (1) TMI 586
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....law as well as on the facts of the case in passing the order u/s 263 of the Act, without providing the adequate opportunity of being heard and without considering the material, evidences and laws, in gross breach of law and principal of natural justice. Thus the same may kindly be quashed. 4. That the Id. Pr. CIT-2 Jaipur is grossly erred in law as well as on the facts of the case in taking the action u/s 263 of the Act on the allegations that: (a). That Deduction of Rs. 50,00,000/- has been claimed u/s 54EC on investment in National Highway authority of India, however no documentary evidence is brought on record to establish the genuineness of the deduction. (b) That Expenditure of Rs. 7,24,429/- has been claimed as repairing and improvement expenditure after indexation. However no documentary evidence is brought on record to establish the genuineness of the said expenditure. (c) That Payment of brokerage charges of Rs. 6,21,000/- has been claimed. However no documentary evidence is brought on record to establish the genuineness of the said expenditure. (d) That Investment of Rs. 71,10,000/-in Destiomoney Securities is not verifiable. ....
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....ld. Pr.CIT passed by invoking provisions of Section 263 of the Act, therefore, we deem it fit to dispose off all these grounds through the present consolidated order. 6. The ld. AR while appearing before us challenging the order passed by the ld. Pr.CIT U/s 263 of the Act and also supported the order passed by the A.O. U/s 143(3) of the Act. The ld AR also relied upon the detailed written submissions filed by him before the Bench which contains all the legal propositions and the factual submissions. The said written submissions filed by the assessee are reproduced herein below: 1.1 Action of the Pr. CIT is invalid and without jurisdiction: It is submitted the action and direction of the ld. Pr. CIT is without jurisdiction and invalid on the facts and legal position because the ld. Pr. CIT has no right or jurisdiction of revision u/s 263 only when the order of the AO (i) is erroneous in so far as (ii) it is prejudicial to the interests of the revenue. S. 263 provides as under "263. (1) The Pr. Commissioner or 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] Off....
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....5). Also vide page 1-3 of the assessment order wherein he has stated that " A/R of the assessee submitted electronic response through e-filling portal/ITBA from time to time and necessary details on various queries were submitted. The ld. AO considered the reply and details and thereafter he stated that the assessee submitted the requisite details and documents related to the limited scrutiny issue which were examined and after considering the submission and supporting details filed by the assessee on the limited issue the returned income is accepted. Thus the AO did examine all these details, record and discussion with the assessee, after that the ld. AO had taken a possible view being a quasi judicial authority. That is why the ld. AO has noted same in the assessment order that at page 1-4. Thereafter he completed assessment at Rs. 3,53,22,650/- vide assessment order u/s 143(3) dt. 26.11.2018 by taking a reasonable and possible view. Here we want to say that if the ld. AO has not examined the issues and claim he could have not made the assessment. When the assessee has filed reply on the issues (PB7-45) with all the bank details and income and verified the same, when the....
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..... Such a view or action is not well founded in the law or by various Hon'ble courts. Kindly refer direct decisions in case of Smt. Leela Choudhary v/s PR. CIT 289 ITR 226(Gau.) also refer, Saw Pipes Ltd v/s Add. PR. CIT 94 TTJ 1036(Del) Also refer Malabar Industrial Co. Ltd. v/s PR. CIT 159 CTR(1)(SC), PR. CIT v/s Rayn Silk Mills 221 ITR 155(Guj.) Same view has been expressed in the case of Kamal Kumar Gupta v/s Pr. CIT 142 TTJ 9(Jp) wherein it has been held that "assessee was asked by the AO to file the details of trade creditors which are shown in the name of agriculturalist. In the reply, assessee filed written submission enclosing the list of creditors. Thus, the AO made the inquiry and it is not a case of lack of inquiry but can be case of insufficient enquiry. Pr. CIT was not justified in passing the order u/s 263." In the present case also is the same position. And also followed in the case of Sh. Gyan Chand Jain v/s Pr. CIT 50 TW 109(Jp). 1.7 Further the ld. AO at page first of the impugned order as well as in the notice u/s 263 at page second (PB47) has stated that the assessee has filed the return of income declaring the total income of Rs.(-)3,53,22,650....
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....ensive scrutiny with approval of Pr.CIT/DIT concerned-It is also instructed that such an approval shall be accorded by Pr.CIT/DIT in writing after being satisfied about merits of issue(s) necessitating wider and detailed scrutiny in case-AO is duty bound to follow instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of competent authority conducting an enquiry on issue which is outside limited scrutiny would be beyond jurisdiction of AO-As a necessary corollary, Pr. CIT u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing assessment as what cannot be done directly cannot be done indirectly-Therefore, where matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening scope of jurisdiction that was originally vested with A.O while framing assessment-As per PCIT, reason for which matter was selected for limited scrutiny i.e, mis-match of sales turnover vis-à-vis ITR, CIB & AIR has a direct bearing on opening and closing stock of cost of construction and W.I.P and in turn, on t....
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....e in capital in relevant year and AO passed assessment order and accepted return filed by assessee after examining issue regarding increase in capital account as assessee had credited his capital account with agricultural income and capital gain from sale of flat-Assessee has reflected that same in its capital account-Further in response to letter issued by AO during assessment proceedings, assessee submitted his reply explaining reason for increase in capital-However, Pr. CIT exercising jurisdiction under section 263, directed AO to make fresh assessment on issues which were not subject matter of limited scrutiny-Since, issue raised by assessee in this case has already been decided in favour of assessee Pr. CIT(A) has exceeded jurisdiction u/s 263 by directing AO to make fresh assessment on issues which were not subject matter of assessment framed on basis of limited scrutiny-Assessee's appeal allowed. Thus in the present case the position are same and the principal of the above judgments are also applicable in the present case. Thus in the light of the facts and position the Pr. CIT cannot be said to be justified in holding that assessment order was passed witho....
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....rd to the assessee before passing the order. Accordingly the revisional proceedings framed u/s 263 by the Pr. CIT are quashed. - Jagnnath Prasad Bhargva vs Lal Nathimal AIR 1943 All 17 Applied. Here is exact same position and the present order is also liable to be quashed. 4.1 No fix formula or limit or extent of Inquiry: Thus, here it is not the case of the Pr. CIT that no inquiry or examine has been made by the AO on these issues. The AO has made the inquiry on the above issues although the very base of the scrutiny of the case was limited issue. On perusal of the assessment order our reply and query of the ld. AO shall revel that the details bank a/c and all the other transaction has been shown there and explained and the AO made inquiry and assessee filed all the details related thereto. No one (AO) can read the mind of other person (Pr. CIT) while doing the work on its sprite and cannot guess the expectation or manner of his superior authority. Here the meaning is that non making of an enquiry may render the subject assessment erroneous, however the process of making enquiries may be endless. For someone, some enquiries may be sufficient (here AO), however, t....
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....oceedings; all that will be necessary is the recording of the Commissioner's view that "the order is passed without making inquiries or verification which should have been made". Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-of a citizen. [L Hirday Naran Vs Income Tax Officer [(1970) 78 ITR 26 (SC)]. As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyone, when circumstances so justify or war....
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....perience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Hon'ble Delhi High Court in the case of Gee Vee Enterprises Vs ACIT [(1995) 99 ITR 375 (Del)], "it is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real-life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279, 288)], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had said that an auditor (read Assessing Officer i....
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....be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a coordinate bench of the Tribunal, in the case of Narayan T Rane vs ITO [(2016) 70 taxmann.com 227 (Mum)] has observed as follows: 20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. ClT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verifi....
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....n. Also refer Gaberial India Ltd. 203 ITR 108 (Bom). That is why Hon'ble SC held in Malabar Fisheries Industries Ltd. 243 ITR 82 (SC) that in each and every type of mistake/ error cannot be made a basis to invoke Sec.263. The case laws available on the subject on this aspect, are distinguishable in as much as those were the cases where no inquiries at all (or very minor reflecting from a short assessment order), which is not at all a case here. Also refer Gyan Chand Gupta V/s PR. CIT 135 TTJ 01(Jp), M/s. Om Rudra Priya Holiday Resort Pvt. Ltd. vs. Pr. CIT (2018) 54 CCH 0597 JaipurTrib In CIT v/s Jain Construction 257 CTR 336(Raj.) It has been held that Revision u/s 263-Order erroneous and prejudicial to interest of revenue-CIT issued a notice u/s 263 to assessee on ground that assessment order of AO passed u/s 143 (3) was an order erroneous and prejudicial to interest of revenue-Tribunal allowed appeal of assessee-Held, safeguard provided to assessee in section 263 is that mere erroneous orders are not revisable but revisional authority has to further establish with material on record that such erroneous order is also prejudicial to interest of revenue-Twin conditions of a....
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....e the same rate of profit. The tribunal was correct in cancelling the order under sec 263 of Income Tax Act." When the assessing officer had considered all the relevant material on record, it was basically a question of facts and it could not be interfered with unless the finding of the Tribunal was found perverse. Considering the material on record, it could be said that finding of the Tribunal was perverse. Therefore, the Tribunal was correct in cancelling the order under section 263." 6.2 Also refer CIT v/s Ganpat Ram Bishnoi 296 ITR 292(Raj.) The record of proceedings clearly shows that the AO has framed his assessment after due application of mind and holding enquiries into all areas, which, according to the CIT have not been at all enquired into and the AO has acted merely on furnishing evidence on one single date. The Tribunal noticed that as per the record of the proceedings, the AO required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, whic....
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....to the conclusion that the issue relating to taxability of compensation received by the assessee was not examined by the AO and held that the order of AO is erroneous and prejudicial to the interest of the revenue- Tribunal has arrived at a conclusive finding that through the assessment order does not patently indicate that issue of the taxability of the compensation has been considered by the AO, the record shows that the AO has applied his mind-Thus, it is not a case of lack of enquiry even if the enquiry was inadequate and the CIT was not justified in passing the order under section 263- findings of the Tribunal quashing the order of the PR. CIT passed under Section 263 do not warrant any inference- CIT V/s Sunbeam Auto Ltd. (2009) 227 CTR (Del) 133: (2009) 31 DTR (Del) 1 followed". 7. In the case of The Lake Palace Hotels & Motels Pvt Ltd v/s The PR. CIT Udaipur 48 TW 181(Jd). It has been concluded that : The fundamental principles which emerge from the catena of judicial pronouncements may be summarized as under : (i) The PR. CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the reven....
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....orporation it has been held " When during course of framing of assessment, Assessing Officer had access to all records of assessee and after perusing said records, he framed assessment, said assessment could not be re -opened in exercise of revision power under section 263 for making further inquires .'' Reference has been made to the decision of Hon'ble Allahabad High Court in the case of Anil Bulk Carriers (P) Ltd. vs. PR. CIT (2005) 194 CTR (All.) 226 : (2005) 276 ITR 625 (All.). It is submitted that department can assume jurisdiction under section 263 of Income tax Act if twin conditions of the order being erroneous and prejudicial to the interest of the revenue are satisfied. If the view taken by the A.O. is one of the possible views then learned CIT cannot assume jurisdiction. For this purpose reliance has been placed on the followings decisions: 1. Malabar Industrial Co. Ltd. v. PR. CIT [2000] 243 ITR 83 (SC) 2. PR. CIT VS MAX INDIA LTD.(2007)213 CTR 266(SC) It is further submitted that proceedings under s. 263 cannot be taken on the ground that the AO has not made sufficient enquiry. The learned PR. CIT can assume jurisdiction if....
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....he section are manifestly for a purpose. Merely because the PR. CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that 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. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment, assuming it to be so, this does not justify the....
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.... his order he did not make an elaborate discussion - Held, no - Whether provisions of section 263 were applicable to instant case and Commissioner was justified in setting aside assessment order - Held, no In the case of CIT vs. Deepak Real Estate Developers (I)(P) Ltd. (2014) 367 ITR 0377 (Raj) It has been held that Revision-Revision by commissioner of orders prejudicial to revenue-AO observed that return submitted by Assessee was duly supported by necessary evidence and accepted Assessee's return-CIT in exercise of his power u/s 263, issued notice to Assessee being of opinion that assessment of AO was erroneous and prejudicial to interest of Revenue-ITAT viewed that CIT could not have formed any opinion that assessment order was erroneous and no reasons had been recorded to demonstrate that assessment order was prejudicial to interest of revenue-Held, perusal of Order of ITAT would testify that AO had consciously examined all relevant records in accepting return submitted by Assessee-CIT did not find fault with any findings of AO, culminating in ultimate conclusion that return of Assessee was acceptable-Decision of CIT authenticates that Assessee furnished all relevant r....
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....hile the supervisory power of CIT is wide, it cannot be invoked to substitute the view of the AO-Fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee. 9. Neither loss return nor assessed income was in loss: Further it is submitted that it may be big reason that to issue the notice u/s 263 by the ld. Pr. CIT because he stated the return income and assessed income of loss of Rs. 3,53,22,650/- while there was neither loss returned income nor loss assessed income the same were positive income of Rs. 3,53,22,650/-. Hence the finding and facts of the ld. Pr. CIT itself was wrong. 10. On Merit our submissions are as under: 10.1 In this regard we have to object to the said notice because on all the above issues have already been raised and discussed and the assessee has also submitted the supporting evidences related to the above issues. And when the case was selected on the limited issue, then it is not open for the Assessing Officer t....
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....015(PB33,19) is also enclosed herewith. Hence it cannot be said that that no documentary evidence is filed. Also acknowledgement of our reply enclosed(PB18) Regarding the expenditure of Rs. 7,24,429/- we have incurred Rs. 2,68,700/- (Rs. 7,24,429/- is after indexation) as repair and improvement/maintenance in various years and we have filed year wise details of these expenses. And on such size of property as land and building and to maintain, it is very nominal expenses also vide our reply filed to AO enclosed herewith(PB 24-25). 3. (iv). Regarding investment of Rs. 71,10,000/- in Destiomoney Securities it is submitted that Destiomoney Securities is brokerage house. The assessee is dealing in shares/mutual funds investment or trading. For that he had opened a Trading account with Destiomoney Securities and assessee has given Rs. 71,10,000/- to Destiomoney Securities for such purpose during the entire year on various dates. The assessee has given this amount from the amount received on sale consideration of property as above on which the assessee had paid th LTCG tax. All these transactions are through the bank statements. In support we had filed the copy of bank s....
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....er under Section 263 was passed-Held, issue is squarely covered in favour of assessee by decision of jurisdictional High Court holding that assessment proceeding is a separate proceedings from penalty proceedings-When principal Commissioner of income tax is assuming jurisdiction u/s 263 she does not have any right to direct assessing officer to initiate penalty proceedings u/s 271(1)(c)-Delhi High Court in Addl. CIT vs. J.K.D.'Costa (1981) 25 CTR (Del) 224 : (1982) 133 ITR 7 (Del) has held that CIT cannot pass an order under s. 263 pertaining to imposition of penalty where assessment order under s. 143(3) is silent in that respect-It is not case where AO has initiated penalty proceedings and dropped it later on-AO did not initiate proceedings at first instance and PCIT has invoked his jurisdiction u/s 263-Satisfaction of assessing officer is always part of order of assessment-Therefore, initiation of penalty proceedings is always part of order of assessment-Non-initiation of penalty proceedings by assessing officer makes order of assessing officer erroneous-Respectfully following decision of Delhi High Court there is no reason to sustain order passed by principal Commissioner o....
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....it u/s 44AB. It was submitted that since the A.O. had not verified the above issues and had completed the assessment in a routine and perfunctory manner, therefore, provisions of Section 263 of the Act were rightly invoked by the ld. Pr.CIT. It was further submitted that as far as the claim of assessee with regard to deduction of Rs. 50.00 lacs claimed U/s 54EC of the Act is concerned, in this respect, no documentary evidence was placed on record by the assessee to establish the genuineness of the fact of claiming deduction U/s 54EC of the Act. It was also submitted that, although during the assessment proceedings, the assessee had claimed expenditure on repairing and improvement after indexation. However, in this regard also, no documentary evidences were placed on record to establish the genuineness of the said fact. It was further submitted that the assessee had also claimed payment of brokerage charges but no documentary evidences have been placed on record by the assessee to establish the genuineness of the said claim of making of payment of brokerage charges. It was further submitted by the ld. CIT-DR that according to assessee, he had made investment of Rs. 71.10 lacs in ....
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.... 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 the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." [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) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendere....
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....e thereof, the assessee had furnished all the details vide reply to the AO which are at page Nos. 7-45 of the paper book. Even otherwise, on perusal of the assessment order, the A.O. himself has clearly admitted in the said order that the assessee through his representative had submitted electronic response through e-filling portal/ITBA and necessary details on various queries were also submitted by the ld. AR and after examining the said details, the A.O. had categorically mentioned that during the course of assessment proceedings, the assessee had submitted reasonable details and documents related to the limited scrutiny issue which were examined by the A.O. and after considering the submission and supporting details filed by the assessee on the limited issue, the A.O. had accepted the returned income. Thereafter he completed the assessment at Rs. 3,53,22,650/- vide assessment order u/s 143(3) of the Act dated 26.11.2018 by taking a reasonable and possible view. However, the ld. Pr.CIT while passing the order of assessment, had categorically mentioned that no compliance has been made to the show cause notice dated 18/03/2021 and had decided the matter on the basis of information ....
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....by the ld. AR that the ld. Pr.CIT in its order has stated that the assessee has filed return of income declaring the total income of Rs.(-)3,53,22,650/- i.e in loss while the assessee has filed his return of income at Rs. 3,53,22,650/- and had also paid tax of Rs. 80,91,960/-. Thus, according to the ld. AR, the ld. Pr. CIT himself has narrated and proceeded on the wrong facts. However, on perusal of the order of ld. Pr.CIT U/s 263 of the Act, we found that there was a typographical error in the order passed by the ld. Pr.CIT which itself is not sufficient to quash the order passed by the ld.Pr.CIT, thus we are not in agreement with the arguments of the ld. AR on this aspect. Although, the ld. AR has challenged the order of ld. Pr.CIT by raising different arguments which are mentioned in the written submissions but one of the main argument of the ld. AR is that there was complete breach of principles of natural justice on the part of the ld. Pr.CIT while passing the order U/s 263 of the Act. In this regard, it was submitted that the ld. Pr.CIT has not provided reasonable opportunity of being heard to the assessee as the ld. Pr.CIT had issued show cause notice on 18/03/2021 for heari....