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TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 322
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....tutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that "the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable: a) That since during the assessment proceedings the AO had issued letter to credi....
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....ck of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable 2.6 That the learned Principal Commissioner of Income Tax has failed to ....
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....visions of law and hence untenable. a) That since during the assessment proceedings the AO had issued letters to creditors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That since the assessee has shown bogus creditors the purchases remained unverified. The AO was required to disallow the purchases however no such addition was made by the AO; c) That the AO conducted no enquiry in respect of unsecured loans from Sh. Mohit Mehta and Smt. Satya Dev; and d) That there is clear lack of inquiry regarding purchase of fixed assets 5. That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had made additions by rejecting the books of accounts u/s. 145 of the Act and estimating the profits and further also made disallowance of expenses and therefore computed the net profit which estimation and computation have neither been rejected nor rais....
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..... Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable: a) That since during the assessment proceedings the AO had issued letter to creditors and debtors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and debtors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That since the assessee has shown bogus creditors ....
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....judicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable. 2.6 That the learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act. 2.7 That while passing the order u/s. 263 of the Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s. 263 of the Act; and thus order on this ground alone deserve to be quashed ....
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.... however no such addition was made by the AO; c) That the Assessing officer conducted no enquiry regarding the purchases and sales made by the assessee; d) That there is clear lack of inquiry regarding purchase of fixed assets. 2.2 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had made additions by rejecting the books of accounts u/s. 145 of the Act and estimating the profits and further also made disallowance of expenses and therefore computed the net profit which estimation and computation have neither been rejected nor raised, in such circumstances the order of revision is perse misconceived, misplaced and untenable, more particularly when income surrendered in the course of survey on account of excess cash, unexplained investment, unexplained expenditure and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without....
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....rder Prayer - It is therefore prayed that, impugned order dated 30.3.2021 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. 5. ITA No. 154/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that "the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Incom....
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....merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Inco....
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....nce with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable: a) That since during the assessment proceedings the AO had issued letter to creditors and debtors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and debtors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That during the assessment proceedings itself it was established that the assessee has shown fake mode of transportation of goods, therefore the loss claimed by the assessee on sale was bogus one and was required to be disallowed and the AO was required to disallow the losses on bogus sale however no such disallowance made by the AO on this account; c) That since the assessee had shown debtors amounting to Rs. 21.84 cror....
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....ause the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable 2.6 That the learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act. 2.7 That while passing the order u/s. 263 of the Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s. 263 of the Act; and thus order on this ground alone deserve to be quashed as such. 2.8 That various other adverse findi....
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....s in respect of sundry creditors/debtors. In some of the cases, addresses of the creditors were not provided. In cases, where addresses had been provided, information was called in 17 cases u/s. 133(6) of the Act and the sundry debtors and creditors were asked to provide confirmed copies of account of the assessee from their books of account and the resultant situation of these notices has been summarized in the order of assessment as under: Sr.No. Status No. of cases 1 Received back undelivered - 2 Neither notice received back nor information has been received 16 3 Information received 1 4.1. In these circumstances, the sundry creditors were held by the Assessing Officer to be not verifiable and, thus, the purchases shown from such sundry creditors were also held to be doubtful. The AO observed that the assessee had shown bogus debtors and creditors to book bogus loss. Moreover, since the assessee had also failed to produce the books of accounts, it was concluded that the assessee had declared huge loss just to adjust the income surrendered at the time of survey. The book results declared by the assessee were, thus, held to be not correct and the same were rejec....
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....re issued by the AO to the creditors and the same were neither replied to nor returned back. You have not given full details of all creditors during the assessment proceedings. Also, on perusal of assessment order it is seen that the assessee has shown bogus creditors. Therefore, it is clear that the creditors remained unverified. b) During the assessment proceedings the AO had observed that the assessee had shown bogus creditors, therefore the purchases remained unverified for the year under consideration. c) You have received unsecured loans from Mohit Mehta and Smt. Sata Devi. However neither you have submitted confirmation of accounts nor the AO has called for. The AO has also failed to make independent enquiry to verify the genuineness of the said loans. Failure on the part of the AO to examine the above issues by conducting any enquiries renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue." 4.4. The director of the company submitted the reply vide letter dated 23.3.2021 and also sought adjournment to file further details. Since this was a time-barring matter, proceedings were finalized on the basis of the reply filed by the as....
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....5. Aggrieved with the order passed by the Ld. Pr. CIT, the assessee is now before this Tribunal (ITAT) and has challenged the proceedings u/s. 263 of the Act. The grounds raised by the assessee have already been reproduced in Para 2 above. 5. Before us, the Ld. Authorised Representative (AR) submitted that the impugned order was passed without satisfying the statutory provisions in the Act. It was submitted that it is not a case of lack of enquiry and also that it is not a case of inadequate enquiry whereby an unsustainable view has been formed by the Assessing officer. It was submitted that if the books are rejected, then the profit declared by assessee in the past or subsequent years should be adopted for estimation of profit for instant year. Reliance was placed on the following judgments: i) 288 ITR 10 (SC) Kachwala Gems v. JCIT ii) 374 ITR 545 (P&H) CIT v. Rajinder Parashad Jain iii) 45 ITR (T) 33 (Chd) DCIT v. Smart Value Product & Services Ltd. 5.1. It was further submitted that once the learned Pr. CIT has not disputed the action of the Assessing Officer vis-à-vis the rejection of books of accounts, the revenue could not rely on the rejected books of account ....
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....an erroneous order prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. Reliance was placed on following judicial pronouncements: i) 350 ITR 555 (Del) CIT v. DLF Ltd. ii) 303 ITR 23 (P&H) CIT v. Munjal Casting 5.5. It was further submitted that an order u/s. 263 of the Act based on highly vague and cryptic observations does not satisfy the statutory pre-conditions contained in section 263 of the Act. Reliance was placed on the following judicial pronouncements: i) 112 taxmann.com 321 (Del) ETT Ltd. v. CIT ii) 120 taxmann.com 187 (Mad) CIT v. Padmavathi iii) 275 Taxman 394 (Mad) CIT v. Vijay Kumar Kogani iv) 117 taxmann.com 986 (Gau) Abdul Hamid v. ITO 5.6. The Ld. AR also submitted that the AO had passed the assessment order after making all possible enquiries and that it was not a case of "lack of enquiry" or "lack of investigation" wherein the Ld. Commissioner was empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and thereafter passing orders thereon. It was also submitted that a perusal of the impugned order read with the show-cause notice would show ....
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....se of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8. 5.9. It was further submitted by the Ld. AR that Explanation 2 to section 263 of the Act does not authorise or give unfettered powers to the Ld. Commissioner to revise each and every order and, is not a substitute to the precondition u/s. 263(1) of the Act. Reliance was placed on the following judgments: i) 70 taxmann.com 227 (Mum) Narayan Tatu Rane v. ITO ii) ITA No. 3391/Del/2018 Arun Kumar Garg HUF v. PCIT 5.10. It was, therefore, prayed that order made u/s. 263 of the Act dated 30.3.2021 be quashed. 6. The Ld. AR submitted that the other five appeals were identical and that the facts as well as the impugned orders were similar, a fact which was not disputed by the Ld. CIT DR also. 7. On the other hand, the Ld. CIT DR supported the action of the Ld. Pr. CIT and vehemently argued that on facts, the impugned action u/s. 263 of the Act was in accordance with law. 8. We have considered the rival submissions and have also perused the material on record. From the records produced before us, it is very much evident that the Assessing Officer had made detailed inquiries regarding the assessee's claim....
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....Officer. Merely because the Ld. Pr. CIT felt that further inquiry should have been made, it does not make the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue. 8.1. We also note that the Ld. Pr. CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr. CIT although it was incumbent upon him to make such inquiry so as to reach the impugned conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. 8.2. Moreover, on facts, rejection of trading results and application of net profit rate by the Assessing Officer is a possible view and, not an unsustainable view and, therefore, even otherwise, invocation of section 263 is not in accordance with law. In the case of CIT vs. DLF Ltd. reported in 350 ITR 555, the Hon'ble Delhi High Court, applying the mandate of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (reported in 243 ITR 83) and CIT vs. Max India Ltd. (reported in 295 ITR 282) has held that it is not a mere prejudicial to revenue act or a ....
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....cipal Commissioner of Income tax 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 handedover to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the Principal Commissioner of Income-tax. 12. Mr. Asheesh Jain then volunteered that the Principal Commissioner of Income-tax had exercised the second option available to him under section 263(1) of the Act by sending the entire matter back to the Assessing Officer for a fresh assessment. That option, in the considered view of the court, can be exercised only after the Principal Commissioner of Income-tax undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case. 13. Therefore, the court is of the view that the Income tax Appellate Tribunal was not in error in setting aside the impugned order of the Principal Commissioner of Income-tax under section 263 of the Act. No substantial question of law arises." 8.3. In the case of M/s. Arun Kumar Garg HUF v. Pr. CIT i....
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....sessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the ITAT Mumbai Bench in the case of M/s. Indus Best Hospitality & Realtors Pvt. Ltd. in ITA No. 3125/Mum/2017 vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is retrospective in nature. Since the year under consideration is AY 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar view has been taken by the various Coordinate Benches of the ITAT in the following cases: (a) AV Industries v. ACIT [ITA No. 3469/Mum/2010] dated 06.11.2015 (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 ....
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....sed by the assessees are identical to the grounds raised in the case of Pardeep Ispat (P) Ltd. in ITA No. 150/Chd/2021 A.Y. 2016-17 with only one distinction that the issue of unsecured loans was not a subject-matter of proceedings u/s. 263 of the Act in these remaining five appeals. However, in the remaining five appeals, the other issues that have been pointed out by the Ld. Pr. CIT in the impugned orders are being dealt with as under: 9.1. In ITA 149/Chd/2021, in the case of Shri Rajiv Goyal, it has been alleged by the Ld. Pr. CIT that the issue of addition to capital account amounting to Rs. 3,63,458/- on account of compensation received and another issue of an amount of Rs. 2,55,800/- pertaining to property in Meerpur has apparently not been enquired into by the AO. A perusal of the record shows that this allegation of the Ld. Pr. CIT is correct in so far as no query has been raised by the AO on these two issues and neither has the assessee made any submissions either before the AO or even before the Ld. PR. CIT on these two issues even when the said issues were duly mentioned in the show cause notice issued u/s. 263 of the Act. Accordingly, we have no option but to uphold th....
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....TA 152/Chd/2021, in the case of Ms. Priyanka, the issues are identical to ITA 151/Chd/2021 in the case of Ms. Priya Goyal. It has been alleged by the Ld. Pr. CIT that apparently no enquiries were conducted by the AO in respect of the issue of investment in construction of house to the tune of Rs. 35,75,000/- and in respect of addition to fixed assets in construction of shop to the tune of Rs. 20,58,525/-. It is seen that the amount of Rs. 35,75,000/- pertaining to the construction of house had already been surrendered by the assessee during the course of survey proceedings as the survey team had noticed some discrepancies. Therefore, it cannot be said that the order of the AO was erroneous and/or prejudicial to the interest of revenue in so far as this issue is concerned. However, as far as the issue of investment in fixed assets in construction of shop to the tune of Rs. 20,58,525/- is concerned, a perusal of the record shows that this allegation of the Ld. Pr. CIT is correct in so far as no query has been raised by the AO on this issue and neither has the assessee made any submissions either before the AO or even before the Ld. PR. CIT on this issue even when the said issue was d....