TaxTMI 
TaxTMI 
2022 (10) TMI 651
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....ired to file comparative chart of gross turn over, gross profit and net profit ratio, details of secured and unsecured loans, additions made to the fixed assets, confirmed copies of accounts of current assets, current liabilities and comparative details of various expenses debited to the profit and loss account. The assessee was also required to file the details of closing stock and the basis of its valuation. Thereafter, the assessment was completed by making an addition of Rs. 1,11,512/- under section 14A of the Income Tax Act, 1961 [in short 'the Act'] and a further addition of Rs. 50,000/-, being ad hoc disallowance on account of car expenses, computer expenses, electric repair expense and fuel on the ground that some of the expenses were not properly vouched and no proper documentation was available. The income was computed at Rs. 17,59,970/- and after giving the benefit of set off of brought forward losses of Rs. 81,53,228/-, the net taxable income was computed at Rs. Nil. 2.1. Subsequently, the Ld. PCIT issued notice under section 263 of the Act. As per the Show Cause Notice, the case was selected for scrutiny through CASS on the following parameters:- a)....
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....ce with the provisions of section 68 of the Act and Rule 11 UA of the Rules. The assessment order was set aside and the AO was directed to decide the issue afresh. 2.5. Aggrieved, the assessee has now approached this Tribunal challenging the action of the Ld. PCIT by raising the following grounds of appeal:- 1. The Ld. Pr. CIT-3 Ludhiana has erred in perfunctorily passing an Order u/s. 263 of the Income Tax Act, 1961. 1.1 The Commissioner of Income tax failed to appreciate that the conditions precedent to passing an Order under the said section were not satisfied and hence the Order U/s. 263 of the Income-tax act, 1961 is ultra vires and void. 1.2 The Commissioner of Income tax has erred in holding that the Assessment Order dated 11.03.2016 passed by the Assessing Officer was erroneous and prejudicial to the interests of revenue and hence erred in passing an Order u/s. 263 of the Income-tax Act in respect of the same. 1.3 The appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the assessment framed by the Assessing Officer was after due consideration of the facts and the law by the A....
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....round that the Ld. AR Shri Pankaj Bhalla was out of station. Still earlier, when the appeal was fixed for hearing on 24.11.2021, the adjournment was sought by the Ld. AR on the ground that the consequential order u/s. 143(3) r.w.s. 263 of the Act was still awaited. 3.1. We further note that this appeal was first fixed for hearing on 26.07.2018 and on that day the hearing was adjourned at the request of the assessee's counsel. Subsequently, the hearings were fixed on the following dates: i) 26.11.2018 ii) 13.03.2019 iii) 19.08.2019 iv) 26.09.2019 v) 18.11.2019 vi) 20.11.2019 vii) 05.07.2021 viii) 20.09.2021 3.2. The record shows that on all the above eight dates, the Ld. AR had sought adjournment for one reason or the other. We would also like to note that the reason mentioned in today's adjournment application that the consequential order u/s. 143(3) r.w.s. 263 of the Act is still awaited, to our mind is not a valid reason for seeking adjournment. Further, it is also to be noted that the impugned order was passed on 30.03.2018 and more than four years have elapsed since the passing of the impugned....
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....ramed u/s. 143(3) of I.T. Act, 1961 on 11.03.2016 in which total disallowances of Rs. 1,61,512/- were made by the then AO, on account of disallowance u/s. 14A and untouched expenses. The case was selected for scrutiny through CASS on the following parameters: (a) Large Share Premium received. (b) Difference in opening stock in current year with the closing stock of previous year. (c) Low income shown by large contractors. Perusal of assessment record reveals the issue of Share Premium received by your company has not been examined thoroughly, as the following deficiencies have been noticed:- (i) Your company i.e., M/s. Sudhir Forgings Pvt. Ltd., had issued Rs. 8,12,500/- shares with face value of Rs. 10/- per share. The shares were subscribed by M/s. Bhole Baba Vanjiya Pvt. Ltd., During the course of assessment proceedings, Your Company produced copy of bank account statement, Audit Report and ITR of the investor company. Perusal of the same reveals that the creditworthiness, genuineness of transactions involved does not stand explained from the material available on record, because of the following reasons: (a) The return of in....
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....rest of the revenue on the part of the then AO and it appears that it is a fit case for revision u/s. 263 of the Income Tax Act, 1961." 5.2. A perusal of the show cause notice, as reproduced above, would show that the Ld. PCIT has pointed out that the perusal of the bank account statement, audit report and ITR of the investor company i.e. M/s. Bhole Baba Vanijya Pvt. Ltd. does not establish the creditworthiness and genuineness of the transactions for the reason that the ITR of the investor company for the captioned assessment year was filed declaring NIL income and further the gross receipts of the investor company was only Rs. 20,000/- whereas, the investor company had invested Rs. 1,62,50,000/- (including share premium) in the assessee company. It was pointed out by the Ld. PCIT that the investor company was having its registered office at Kolkata whereas, the return was being filed from the address of 74-A, Tagore Nagar, Civil Lines, Ludhiana which was the address of the assessee company. The Ld. PCIT has also pointed out that the bank account of the investor company had one Shri Dhruv Garg as the joint holder of the account and that Shri Dhruv Garg was one of the directors o....
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....13 empowering the AO to look into source of source of the persons investing in companies in which public are not substantially interested. The Ld. PCIT returned a clear finding that the AO did not carry out the required examination in the light of this amendment and that further the valuation of premium had also not been examined by the AO in terms of Rule 11 UA of the Rules. 5.6. We have also perused the assessment order and we note that in page 2 of the said assessment order, the AO has mentioned that the assessee was required to file comparative chart of gross turnover, gross profit and net profit ratio, details of secured an unsecured loans, additions made in the fixed assets, confirmed copies of account of Current Assets, Current Liabilities and comparative details of the expenses debited under various heads. Besides, the assessee was also required to file details of closing stock and the basis of valuation. However, it is noteworthy that the Assessing Officer does not mention as to what details regarding share premium were called for and as to what details were submitted by the assessee. 5.7. Thus, a combined reading of the orders of the AO as well as the Ld. PCIT would....
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.... Ld. PCIT in the impugned order wherein the assessee has mentioned the various documents submitted before the AO but there is no mention of any valuation report having been submitted which would be in terms of Rule 11UA of the Income Tax Rules. 5.9. It will be relevant at this juncture to refer to some of the judicial precedents on the powers of the Commissioner u/s. 263 of the Act. In the case of Gee Vee Enterprises Vs. ACIT (1975) 99 ITR 375, speaking for High Court of Delhi, their Lordships made a clear distinction between the cases of "inadequate inquiry" and "lack of inquiry" by also considering the ratio of the decision of Hon'ble Apex Court in the case of Rampyari Devi Sarogi vs CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs CIT (1973) 88 ITR 323 (SC) and held that it is incumbent upon the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent and the word "erroneous" in Section 263 includes failure to make such an inquiry. It was further held that the order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are ....
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....al capital, the sale of ornaments, the income from business, the investments etc., without any inquiry or evidence whatsoever and that the order of assessment was erroneous and prejudicial to the interests of the revenue. The High Court held that there were materials to justify the Commissioner's finding that the order of assessment was erroneous in so far as it was prejudicial to the interests of the revenue. Shri Sharma tried to distinguish this decision on the ground that the address of the assessee in that case was given incorrectly. The decision of the High Court and that of the Supreme Court were not, however, based on that ground at all. On the contrary, the Supreme Court followed their previous decision in Rampyari Devi's case and upheld the decision of the High Court precisely on the same grounds. These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assess....
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....n error which makes an order unsustainable in law. 11. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word ''erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. 12. Delhi High Court in Gee Vee Enterprises v. Additional Commission of Income-Tax, Delhi-1, (1975) 99 ITR 375, has observed as under:- "The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence o....