TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 822
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or prejudicial to the interest of the revenue and hence the prerequisite of twin conditions for the exercise of jurisdiction by the Ld. Pr. CIT suomoto under it being absent in this case, the impugned order u/s.263 of the Act should be quashed on the facts of the case. 2. That, the order of the Ld. Pr. CIT u/s.263 directing the A.O. to pass a fresh assessment order as per directions contained therein is against the law settled by various judicial pronouncements on the issue inasmuch as there is no incidence that tax lawfully exigible has not been imposed or a lesser tax has been imposed. 3. That, the Ld. Pr. CIT has wrongly assumed jurisdiction u/s.263 of the Act for setting aside the original assessment order with regard to cash payment of Rs.2,24,63,103/- made for purchase of old gold jewellery when it was duly explained to him that the A/R of the assessee had inadvertently while filing the details of total purchases during the course of assessment mentioned 'cash payment of Rs.2,24,63,103/-'instead of 'Exchange of Old Gold Jewellery against bale of new Items to Retail Customers of Rs.2,10,38,492/-' and "Purchase of Old Jewellery through Bank of Rs.14,24,611/- and further ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gold jewellery. In terms of Section 40A(3) of the Income Tax act, 1961, if cash payment in excess of Rs 20,000/- is made in case of any expenditure, the said expenditure is not allowable. Hence, following the provision of section 40A(3) of the I.T. Act, the above said expenditure of Rs.2,24,63,103/- was required to be added back while computing total income. However the same was not done. Failure to do so has rendered the order erroneous in so far as it is prejudicial to the interests of the revenue. 3. In the light of the above, it is clear that the AO has, while passing the order u/s 143(3) of the Act, failed to make proper and the required enquiry/verification under clause (a) of Explanation 2 to section 263 of the I.T. Act, 1961 in respect of the above issue. As such, the assessment order u/s 143(3) of the I.T. Act, 1961 dated 29/11/2019 is erroneous and prejudicial to the interests of Revenue. 4. In view of the above, you are requested to explain as to why the assessment order in your case Radheshyam Gupta, PANADJPG3274G for the A.Y. 2017-18 should not be revised u/s 263 of the Income Tax Act, 1961 as the assessment order passed in the aforesaid case is erroneous in s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. The ld.PCIT, thus, held that the assessment order passed u/s. 143(3) of the Act dt. 29-11-2019 deserves to be set aside and restored it back to the file of the ld.AO to frame fresh assessment after considering the issues as discussed in the impugned order. 7. Aggrieved, now the assessee is in appeal before this Tribunal raising various grounds challenging the exercising the jurisdiction by the ld.PCIT u/s. 263 of the Act and also challenging the direction of the ld. PCIT in setting aside the assessment order passed u/s. 143(3) of the Act dt. 29-11-2019 is bad in law. 8. The Ld. Counsel for the assessee referring to written submissions and paper book containing various details running into 56 pages, another paper book containing month wise summary of old gold jewellery, purchase ledger of old jewellery payments though banks, sample copy of the sale memo and purchase memo etc. running into 146 pages, copy of cash book for the FY 2016-17 stated that no sum of money was paid in cash or for purchase of old jewellery. Our attention was invited to Sheet Nos. 1 to 12 placed at pages 2-13 of P.B containing the month-wise details of sale and purchase for the of the year. It was stated t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1. We have heard the rival contentions and perused the record placed before us and carefully gone through the judgments and the decisions referred by the ld. Counsel for the assessee. In this appeal the assessee has challenged the action of the ld. PCIT invoking the jurisdiction u/s. 263 of the Act and setting aside the assessment order dt. 29-11-2019 framed u/s. 143(3) of the Act holding it as erroneous and prejudicial to the interest of the revenue. 12. Section 263 of the Act has a direct bearing on the issue raised before us. Therefore, it will be relevant to discuss the scope of section 263 of the Act as well as judicial pronouncements. "263. Revision of orders prejudicial to revenue.--(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 the circumstances of the case justify, including an order enhancing or modifying the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Supreme Court's decision is against the assessee or any other person and AO passed the order without considering such judgment then such order shall be considered as erroneous and prejudicial to the interest of revenue. 15. We note that in the judgment of the Hon'ble Delhi High Court in the case of PCIT vs. Delhi Airport Metro Express Pvt. Ltd reported in [2017] 398 ITR 8 (Delhi),it was held that, "9. It is seen, in the order dated 30th March 2016, the PCIT has proceeded by setting out the contents of the SCN and the contents of the reply given by the Assessee. It appears that no inquiry, as such, was undertaken by the PCIT to come to the conclusion that the original assessment order was erroneous and prejudicial to the interests of the Revenue. 10. For the purposes of exercising jurisdiction under Section 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circula....
X X X X Extracts X X X X
X X X X Extracts X X X X
....[Para 5] 17. Hon'ble Delhi High Court in the case of ITO vs D. G. Housing Projects Limited. [2012] 20 taxmann.com 587 (Delhi High Court), held that : "19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous". The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Incometax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." 20. Hon'ble Supreme Court in CIT v. Max India Ltd [2007] 295 ITR 0282-SC it has held that: "The phrase (prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been filed by the assessee on multiple occasions and thus, it remains uncontroverted fact that an independent enquiry was carried out by the ld.AO and after due consideration of facts and proper application of mind a permissible view has been taken for assessing the income of the assessee. It is also worth noting that no independent enquiry has been conducted by Ld.PCIT on his own before setting aside the order of Assessing Officer. Therefore, on this ground itself the impugned proceeding u/s. 263 deserves to be quashed as the ld.AO has conducted adequate enquiry on the said issue. 25. Now we come to the merits of the case. After carefully considering the submissions of the assessee and perusing the material/submissions of the assessee filed before the ld.AO, we find that the assessee is in the course of its business of selling of old gold jewellery and occasionally receives old gold jewellery in exchange from the customers. The value of such old gold jewellery is calculated by the assessee as per rates of the gold/silver/diamond or other precious stones as on the date of the transaction and the same is reduced from the sale value of new jewellery purchased by such customers. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g jewellery and it was also purchasing old gold and old diamonds from its customers, who wanted to exchange their old jewellery with new jewellery. Contention of the assessee that it was not effecting any cash purchase from its customers, has not been effectively rebutted. Case of the assessee is that it was effecting purchase of old jewellery from customers who were willing to buy new jewellery from the assessee. In some of the cases, when old Jewellery were given, they were taken for manufacturing new jewellery or to make certain customized changes required by customers. We are unable to accept the view of the A.O. that unless and until the sale and purchase were effected on same day, Section 40A(3) was attracted. Clause (d) of Rule 6DD which gives the alleviating circumstances where rigours of Section 40A(3) are not attracted, states as under:- "where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee. " 13. Thus, where the payments were effected to a customer on account of adjustment resulting out of an exchange of old jewellery with new Jewellery, the....