TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1067
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....assing the revisionary order u/s 263 of the Income Tax Act, 1961 in spite of the fact that the Ld. AO has made adequate inquiries and verification of documents, books of accounts were also sought from the assessee during the course of assessment proceedings and AO has taken one permissible view. The order passed by the AO is neither erroneous nor prejudicial to the interest of revenue, hence the order of PCI" should be set aside: 3. The Id. PCIT has revised the order of the A.O. u/s 263 only on the basis of Audit Objection, hence passing the revisionary order u/s 263 on the basis of Audit Objection is illegal and bad in the eyes of law. 4. The Id. PCIT has not considered or has not uttered a single word on order sheet entries of the A.O. correspondence of Audit Objection/ Judgements on Audit Objections given by the assessee during the proceedings, which violates the Principles of natural justice, hence the order passed by PCIT u/s 263 of the Income Tax Act, 1961 should be set aside." 2. Briefly, the facts of the case are that the case of the assessee was reopened by issuance of notice u/s 148 on the basis of information received from DDIT (investigation), Kolkata that the a....
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....igh Court in the case of CIT Vs. Sohana Woollen Mills, 296 ITR 238 and the decisions of Coordinate Benches in the case of Jaswinder Singh Vs. CIT in ITA No.690/Chd/2010, dated 09.03.2012, Sartajj Singh Vs. PCIT, ITA No.154/Asr/2015, dated 25.02.2016, Jeewanlal Ltd. Vs. Addl.CIT, 108 ITR 407, dated 12.12.1975 and Mannnesmann Demag A.G. Vs. DCIT, 53 ITD 533 (Delhi), dated 20.03.1995. It was accordingly submitted that the order of the ld PCIT be set-aside and that of the Assessing office be sustained. 4. Per contra, the Ld. CIT/DR firstly submitted that it is not correct to say that the Ld. Pr.CIT has not applied his independent mind to the issue at hand and has merely relied upon the audit objection. It was submitted that it is not in dispute that there was an audit objection in the case of the assessee and it was brought to the notice of the Ld. Pr.CIT and basis such audit objection and perusal of the assessment records and on examination thereof, the Ld. Pr.CIT has initiated action u/s 263 of the Act. In this regard, our reference was drawn to para 2 of the impugned order wherein it was mentioned that the assessment records were called for and examined and thereafter on examinatio....
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....oked by the Ld. Pr.CIT. It was accordingly submitted that there is no basis in the contention advanced by the Ld. AR and accordingly, the appeal of the assessee deserves to be dismissed. 5. We have heard the rival contentions and purused the material available on record. Firstly, the order so passed by the ld PCIT has been assailed on the ground that the matter has been duly examined by the AO and it is therefore, not a case of lack of enquiry on part of the AO and thus, the jurisdiction u/s 263 has been wrongly invoked by the ld PCIT. In this regard, we find that it is a matter of record that reasons were recorded and the case of the assessee was reopened u/s 147 basis information received from DDIT(Inv), Unit 2(1) Kolkata that cash deposits have been made in the bank account of M/s Gupta Trading Co, M/s Adarsh marketing & Naresh Kumar Pareek and such cash deposits were routed through several layers before reaching the beneficiaries and on the basis of cash trail prepared, it is observed that assessee company had received a sum of Rs 25 lacs from M/s Bholenath Dealers Private Limited out of such explained sources. In this regard, the ld PCIT has recorded a categorical finding tha....
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....sessee company shown its inability to produce the same for the reason that the assessee company is not in possession of the share certificates as the same has been handed over to the purchaser company. The submissions so filed were considered without any adverse inference by the Assessing officer. In this regard, the ld PCIT has stated that the Assessing officer has accepted the version of the assessee without any verification/confirmation from the purchaser or the broker in a routine manner and the mere fact that the payment has been made through normal banking channel is not enough to establish the genuineness of the transaction and the provisions of section 68 are clearly attracted. We agree with the findings of the ld PCIT and are of the considered view that merely issuing a show-cause and accepting the version of the assessee without any corroborative documentation to support the same and carrying out independent verification is clearly a case where the Assessing officer has failed to carry out necessary verification and examination. The factum and real nature of the transaction being a transaction of sale of shares is clearly not established in the instant case. Merely receiv....
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....hich has been reproduced in the earlier part of this order. On a consideration thereof and the proposition of law as cited before us, we find that objections of the ld. CIT-DR are valid. On a careful reading of the decision of the jurisdictional High Court in the case of CIT Vs Sohana Woollen Mills 296 ITR 238 (P&H) we find that the proposition of law as laid down by the jurisdictional High Court is that; "Mere Audit Objectionand merely because a different view could be taken were not enough to say that the order of the AO was erroneous or prejudicial to the interests of the Revenue." A plain reading of the said decision makes it clear that the two reasons being considered by the Hon'ble High Court i.e. Audit Objection and the possibility of the Revisionary Authority having a view different from the view taken by the AO were by itself not sufficient to warrant the exercise of Revisionary Powers u/s 263. The decision proceeds on the well accepted legal position of law, namely the order sought to be set aside by the ld. PCIT must necessarily meet the twin requirements of pointing out the error in the order passed and such an error which is also prejudicial to the interests of the....
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.... have perused the records. The contention raised on behalf of the assessee that the action of the Commissioner of Income-tax under Section 263 based on the audit objection is invalid and contrary to law is not wellfounded. Whereas we agree with the learned counsel for the assessee that the powers under Section 263 are vested in the Commissioner of Income-tax and it is he who has to apply his mind before coming to the conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue, yet, that does not mean that the Commissioner of Income-tax has not to be assisted by anyone else in collecting information and in bringing to his notice any errors or omissions requiring action under Section 263 or under any other provision of the Act. It will be unreasonable to perceive that the Commissioner of Income-tax would himself examine the assessment records of all the assessees within his jurisdiction so as to arrive at a conclusion whether any action under Section 263 is required or not. It is humanly impossible. Therefore, setting up of a machinery known as internal audit which assists the Commissioner of Incometax in this regard is not improp....
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....x in having initiated action after the receipt of the objection from the internal audit, in so far as, we are satisfied that CIT has applied his mind before taking action under Section 263. This objection raised on behalf of the assessee in this regard is, therefore, rejected. 9. Therefore, in the instant case, merely because there is an Audit Objection, contention regarding the exercise of powers u/s 263 as invalid cannot be accepted. What is relevant to examine is whether there is a mechanical exercise of revisionary powers u/s 263 by the ld PCIT by merely citing the Audit Objection or there is due application of mind by him before exercise of such powers. In the instant case, we refer to para 2 of the impugned order wherein it was mentioned that the assessment records were called for by the ld PCIT and examined and thereafter on examination of the records, it was noted that the AO has not made proper and in depth enquiries and thereafter a show cause notice was issued by the Ld. Pr.CIT and the contents thereof read as under: "2. Assessment records were called for and examined. On examination of the record, it is seen that the assessment was completed under section 143(3)r.w.....