TaxTMI 
TaxTMI 
2023 (7) TMI 224
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.... facts in directing and, holding that "entire amount of Rs. 99,209/- of PF and Rs. 30,841/- of ESIC required addition as these payments are not within permitted time" when as a matter of fact, no such addition was warranted either on fact and in law and therefore unsustainable. 2.1 That even otherwise that conclusion that '"the assessee is not eligible for claim beyond due date prescribed under PF Act & ESIC Act to be disallowed u/s 36 of IT Act" is factually incorrect, legally misconceived and wholly untenable. 2.2 That further finding of the learned Principal Commissioner of Income Tax that the issue regards to details of Entertainment tax, EPF, ESCIC, Service Tax and VAT needs to be enquired thoroughly is not based on correct appreciation of facts and in law, apart from being without jurisdiction. 3 That the finding of the learned Principal Commissioner of Income Tax that "the claim of loss on disposed off assets the assessee was not eligible to claim loss on car wherein the block of assets not ceased to exist. The assessee accepts that due to inadvertent errors on the part of the assessee company the value of assets have been taken at Rs. 11,70,034/- ....
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....6,553 - 4 Service Tax 3,22,901 3,22,901 - 5 VAT 18,51,632 15,03,308 3,48,324 Sum of Rs. 3,48,324 has been duly deposited on 11.4.2017 (page 124 of Paper Book) i.e. before due date of furnishing the return of income, therefore no disallowance is warranted. (Reply dated 12.3.2022 at page 80 read with page 124 of Paper Book) 2.2 It is submitted that in respect of aforesaid issue, the appellant vide reply dated 12.3.2022 (pages 77-100 at page 79-80 of Paper Book) filed before learned PCIT has submitted that sum of Rs. 3,48,324/- was duly deposited on 11.4.2017 (page 124 of Paper Book) i.e. before due date of furnishing the return of income; hence no disallowance is warranted. 2.3 It is submitted that finding of learned PCIT at page 8, para 9.2 has held that "the assessee vide reply dated 12.3.2022 submitted that it was assessee's mistake by the Auditor and disallowance of Rs. 3,48,324/- was not required" is misconceived. It is submitted that the contention of the appellant was that "That the VAT liability of Rs. 3,48,324/- which was incurred in the year under review was duly deposited on or before the due date of....
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....eb-17 0 Mar-17 3254 31-May-17 Mar-17 0 Total 60,557 38,652 3.3 It is submitted that the sum of Rs. 38,652/- has already been disallowed by appellant as part of disallowance of Rs. 83,847/- (page 3 read with page 27 and 79-80 of Paper Book) and was also submitted before learned PCIT as under: (pages 77-100 at page 80 of Paper Book) "B. Mismatch in disallowance made by the auditor in column 20b of Tax audit report in form 3CD and disallowance in the Return of Income as per section 36(l)(va) of the Income Tax act.:- The notice u/s 263 states that no independent verification was made by the assessing officer in respect of deposit of Employee's Contribution of PF & ESI received by the assessee Company during the year under review. In this regard, we submit that during the year under review the assessee Company had recorded Rs. 30,841/- of ESIC's employees share & Rs. 99,209/- being PF's employees share. The details ESIC & PF shares is explained as under:- a. PF Contribution (Employees share) During the year under rev....
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....me u/s 139(1) and the same was disallowed in the Return of Income as explained in Table A above. However, as per section 43B(b) only employers share is disallowed if the same is not paid before due date of furnishing the return of income u/s 139(1), but the Company had wrongly disallowed the both employer and employees contribution u/s 43 B while filing return of Income instead of disallowing 36(l)(v)." 3.4 It is submitted that learned PCIT has not disputed the aforesaid contention of appellant but has held that (page 9, para 10(2) of impugned order) "the disallowance in PF and ESIC Employee contribution the plea of the assessee that part of it has been disallowed by the assessee u/s 43B of IT Act is not justified since disallowance was required to be made u/s 36(l)(va) of the Act." 3.5 It is thus submitted that in view of aforesaid fact that disallowance has already been made by appellant; there is noprejudice to revenue and In fact order is also not erroneous. It is further submitted that even the finding that assessee may claim it in next year on the basis of payment during the year is also misconceived. 4 It is next submitted that learned PCIT has als....
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....e of Rs. 30,841/- out of which the company had deposited Rs. 4916/-. Details of month wise contribution received from employees are as under:- Name of Liabilities Chandigarh Unit Delhi Unit Employee's Contribution to ESIC For the Month Amount Date of Deposit For the Month Amount Date of Deposit Apr-16 1726 03-feb-17 Apr-16 1552 Not deposited May-16 1664 22-Mar-17 May-16 1419 Jun-16 1526 22-Mar-17 Jun-16 1020 Jul-16 1376 Not deposited (total of not deposited is Rs. 18,132/-) Jul-16 976 Aug-16 1376 Aug-16 772 Sep-16 1376 Sep-16 982 Oct-16 1314 Oct-16 561 Nov-16 779 Nov-16 511 Dec-16 1190 ....
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.... of new amendment in section 36 of Act. It is submitted that aforesaid finding are also misconceived in view of judgment of Hon'ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. in ITA No. 983/2018. 5.1 Further reliance is also placed upon following decisions wherein it has been held that amendment brought out by Finance Act, 2021 will take effect from 01st April 2021 and will prospectively apply in relation to the assessment year 2021-22 and subsequent years therefore does not apply to year under consideration i.e. 2017-18 i) ITA No. 97/D/2022 dated 18.5.22 Dayal Industries (P) Ltd. vs. AO (Batch of cases) ii) ITA No. 1051/D/2022 dated 15.6.2022 Pratham Motors (P) Ltd. vs. ACIT (Batch of cases) 6 3^rd Issue 6.1 It is submitted that learned Assessing Officer during course of assessment proceedings in notice dated 27.9.2019 (pages 38-44 at page 43 of Paper Book) u/s 142(1) of the Act "22. Details of addition to fixed assets made during the year, with evidence and the assets sold during the year with calculation of profit and loss on sale of fixed assets." 6.2 It is s....
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....lause 9e any other allowance under Part A OI-Other Information of ITR form along with bad debts. Details of amount disallowed under clause 9e are as under:- Particulars Amount i Loss on sale of Assets Rs. 24,860/- ii Loss on Scrapped/disposed off assets Rs. 31,23,117/- iii Bad Debt/Amount written off Rs. 32,93,694/- Total Rs. 64,47,471/- The extract of the ITR filed showing the above stated disallowance is being produced below: 9 Amounts debited to the profit and loss account, to the extent disallowance under section 40A a Amounts paid to persons specified in section 40A(2)(b) 9a 0 b Amount paid otherwise than by account payee cheque or account payee bank draft under section 40A(3)-100% disallowable 9b 0 c Provision for payment of gratuity [40A(7)] 9c 0 d Any sum paid by the assessee as an employer for setting up or as contribution to any find, trust, company, AOP, or BOI or society or any other institu....
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....e and the return filed which was duly provided and considered by the Learned Assessing Officer in faming the assessment order. The disclosures are available in the computation and the income tax return filed with certain disclosures under the column "Any Other Disclosure" under Schedule 01. The contention of notice u/s 263 is that loss on sale of fixed assets of Rs. 24,860/- has been claimed and loss on sale of scrapped/disposed off assets of Rs. 31,28,172/- has been claimed while the balances of these assets still exists in block of assets. We would like to explain this as under:- Loss on sale of assets and assets disposed of details was submitted in reply to point no. 22 vide para no. 12 of our reply submitted on 1st December, 2019 (pages 54 of Paper Book). A detailed annexure showing working of loss on sale and asset scrapping was submitted, which is being provided here in under:- Sr. No. Particulars Sale Value Loss on sale Loss on scrapping a. Gas Breakign Oven 83,000 7,667 - b. Kitchen Equipment 18,000 5,859 c. Chocolate Modules 8,....
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....e. In profitability was loss on sale of assets/scrapping of asset. Thus it is evident from the above submission that the company suffered losses on scrapping of assets which were not feasible to be removed from the site - for ex- Designing fee, Signboards, Furniture & Fixture etc. - the loss for the above assets of Rs. 31,28,117 has been rightly added in the computation along with the actual loss on assets which were sold. This loss on sale is apparent from the Computation of Income filed and the assessee on its own gave a detailed explanation with working for the losses from sale and scrapping of assets. A detailed working in the form of Annexure was also provided to the Learned Assessing Officer working out the loss on sale and scrapping of asset. The actual sale value of all the assets sold came under the 15% Depreciation bracket rate and the sale amount was thus rightly excluded from the Depreciation chart as per Income Tax Act. There was no realisation from other assets i.e. Furniture/Fixture, Building, Designing charges etc. and thus no sale value was rightly shown under the other assets in the Depreciation Chart as per Income Tax Act. Thus it is evident that the Lea....
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....ous and prejudicial to the interest of Revenue. Further in a case where two views are possible and the learned Assessing Officer has taken a view with which the PCIT does not agree, the said order cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law as held by Hon'ble Delhi High Court in the case of CIT vs. DLF Ltd. reported in 350 ITR 555whereby Hon'ble Court has held as under: "11. In this case, the record reveals that the AO had issued notice, and held proceedings on several dates (of hearing) before proceeding to frame the assessment. He added nearly Rs. 2 crores to the income at that time. The Commissioner took the view that the assessment order disclosed an error, in that the deduction under Section 14-A had not been made. Now, while the statutory direction to the Assessing Officer to calculate, proportionately, the expenditure which an assessee may incur to obtain dividend income, for purposes of disallowance, cannot be lost sight of, equally, such a requirement has to be viewed in the context and circumstances of each given case. In the present case, it wa....
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.... cause notice u/s 263 of the Act, it is seen that there are no new fact that have emerged after assessment order or any fact that have been skipped by the learned Assessing Officer. All the facts and report of the investigation wing were available with the learned Assessing Officer at the time of assessment proceedings. Therefore, it is evident that the learned officer had conducted proper enquiries before framing the assessment. Infact, the learned Assessing Officer had made all necessary enquiries provided in law and thereafter alone had accepted claims of the assessee. Hence, by no justification, it could be alleged that, the order of assessment framed by the learned officer is erroneous within the meaning of Section 263 of the Act and as such, notice is without jurisdiction. Reliance is also placed on the following judicial pronouncements: i) 295 ITR 282 (SC) CIT v. Max India Ltd. the Hon'ble Apex Court in the above case applied the ratio in the case of Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83 wherein it has been held as under: "A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissione....
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....e Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. C/T [1968] 67ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. C/T [1973] 88 ITR 323 (SC)." i) 437 IR 285 (Del) Pr. CIT v. Brahma Centre Development (P) Ltd. ii) 171 ITR 698 (All) CIT v. Goyal Private Family Specific Trust iii) 170 ITR 28 (All) CIT v. KashniNath& Company iv) 171 ITR 141 (MP) CIT v. Ratlam Coal Asn. & Co. v) 430 ITR 55 (Kar) CIT vs. Cyber Park Development & Construction Ltd. vi) ITA No. 2519/Kol/2017 dated 18.4.2018 Garg Brothers (P) Ltd. vs. DCIT vi) ITA Nos. 3281-3284/D/2015 dated 11.10.2019 Smt. ShumanaSen vs. DCIT vii) ITA No. 5239/D/2019 dated 21.2.2020 M/s Sunrays Cotspin (P) Ltd. vs. PCIT viii) ITA No. 3207/Ahd/2009 Gujarat Laxmi Majur Kamgar Sahkari Mandi Ltd. vs. CIT ix) ITA No. 499/Chd/2016 dated 9.11.2016 Sh. Paramjit Singh vs. PCIT 7.3 Moreover, it is submitted, in any case, it is not a case where conditions for exercise of power u/s 263 of the Act stand satisfied since at best it is a case, where two view are possible (one....
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....s. ITO, (1977) 106 ITR 1 (SC)]." 8.3 The Hon'ble Delhi high Court in the case of CIT vs. Sunbeam Auto Ltd. reported in 332 ITR 16it has held as under: "Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open." [Emphasis supplied] 8.4 Further in the case of ITO vs. D.G. Housing Projects Ltd. reported in 343 ITR 329to has held that in cases of wrong opinion or wrongfinding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. It was held as under: "19. In the present case,....
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....e in the impugned order is to refer to the Circular of the CBDT and conclude that "in the case of the Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue". 11. In the considered view of the Court, this can hardly constitute the reasons required to be given by the PCIT to justify the exercise of jurisdiction under Section 263 of the Act. In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by the Assessee out of its own funds during the AY in question and, which were those assets that were handed over 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 PCIT. 13. Therefore, the Court is of the view that the ITAT was not in error in setting aside the impugned order of the PCIT under Section 26....
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....g the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustai....
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.....2020 M/s Klaxon Trading (P)Ltd. vs. PCIT ii) ITA No. 1781/D/2016 dated 24.4.2019 Sanjeev Singh vs. PCIT 10 THAT FOR HOLDING THAT THE ASSESSMENT ORDER PASSED BY LEARNED ASSESSING OFFICER IS NOT ONLY PREJUDICIAL TO THE INTEREST OF REVENUE BUT IS ALSO ERRONEOUS LEARNED PCIT HAS TO BE PRECEDED BY SOME MINIMAL INQUIRY. 10.1 The burden is on the learned Commissioner of Income Tax to establish that there is an 'error' in the order of assessment and in absence of an 'error' invocation of section 263 of the Act is not in accordance with law. Reliance is placed on the judgment of Hon'ble Delhi High Court in the case of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8 wherein it has been held as under: "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 Circular of the CB....
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....bsence of making a further enquiry. It is made clear that our above observations should not be inferred to mean that it is open to the Assessing Officer to enquire into the source of source for the purpose of the present facts. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan {supra) has observed that there can be no doubt that where the view taken by the Assessing Officer is a possible view, interference under Section 263 of the Act, is not permissible. 10.4 Reliance is also placed on the following judgments i) ITA No. 3205/Del/2017 M/s Amira Pure Foods (P) Ltd. v. PCIT ii) ITA no. 574/Del/2018 dated 19.06.2018 M/s VidyaPrakashanMandir (P) Ltd. Vs Pr CIT iii) ITA No. 2539/Del/2018 dated 29.08.2018 Durgesh Autofin P Ltd vs Pr CIT 11. EXPLANATION 2 TO SECTION 263 OF THE ACT DOES NOT AUTHORISE OR GIVE UNFETTERED POWER TO COMMISSIONER TO REVISE EACH AND EVERY ORDER AND, IS NOT A SUBSTITUTE TO THE PRECONDITION U/S 263(1) OF THE ACT. ....
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.... 11.2 Reliance is also placed on the following judgments: SUPREME COURT i) 390 ITR 292 (Bom) CIT v. NiravModi affirmed by Apex Court in the case of CIT vs. NiravModi reported in 244 Taxman 194 (SC) (pages 137-146 of JPB) Income Tax Appellate Tribunal i) 51 CCH 0473 dated 29.11.2017 M/s Amira Pure Foods (P) Ltd. v. PCIT ii) 169 DTR 153 (Del) M/s VidyaPrakashanMandir Pvt. Ltd. vs. PCIT iii) ITA No. 3391/D/2018 Arun KumarGarg HUF vs. PCIT iv) ITA No. 2742/D/2017 dated 08.04.2019 Cotton Textiles Mills (P) Ltd. v. Pr. CIT v) ITA no. 3125/Mum/2017 dated 19.01.2018 M/s Indus Best Hospitality & Realtors Pvt Ltd vsPr CIT. vi) ITA No. 3498/ Mum/2017 dated 02.01.2018, Shri Anil L. Todarwal. vii) ITA No. 1007/D/2019 dated 25.9.2019 Rekha Gupta v. Pr. CIT viii) ITA No. 456/D/2021 dated 4.4.2022 NarendraAggarwal vs. PCIT "25. As far as the invocation of Explanation 2 to Section 263 by PCIT in the present case is concerned, we are of the view that only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and su....
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....el) Regency Park Property Management Services Pvt. Ltd. vs. CIT ii) 125 TTJ 428 (Del) Rajiv Agnihotri vs. CIT iii) 131 ITD 58 (Jai) Rajiv Arora vs. CIT iv) 137 TTJ 67 (Pat) Ramakant Singh vs. CIT PROPOSITION VII: THAT PROCEEDINGS U/S 263 HAVE TO BE CONFINED TO FINDINGS RECORDED BY LEARNED ASSESSING OFFICER AND NOT BEYOND i) 140 ITR 490 (P&H) Jagadhri Electric and Supply Co. vs. CIT ii) 192 ITR 547 (Kar) CIT vs. L.F.D. Silva iii) 192 ITR 50 (Mad) CIT vs. Late T.S. Srinivasalyer iv) 60 ITD 295 (Del) Jagjit Industries Ltd vs. ACIT v) 61 ITD 307 (Ahd) SatishbhaiJayantilal Shah vs. ACIT vi) 125 Taxation 188 (AP) CIT vs. G.K. Kabra Cooperative Ind. Estate vii) 61 ITD 317 (Mad) Sanco Trans Ltd. vs. ACIT 13. It is thus submitted that the conditions or the factors enabling the learned PCIT to invoke his jurisdiction u/s 263 have not been satisfied. It is submitted that there must be positive material for the Commissioner to consider objectively and not subjectively that the order of the Assessing Officer was erroneous, in so far as it was prejudicial to the interest of revenue. The Ho....
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....udicial to the interest of the Revenue and directed the AO to make the assessment afresh. 6. During the course of hearing, the learned counsel for the assessee submitted that the finding of the learned Pr. CIT is contrary to the record and misconceived. It is submitted that the VAT liability of Rs. 3,48,324/- was incurred during the year under consideration and was duly deposited before the due date of furnishing of return of income u/s 139(1) of the Act, hence no disallowance was warranted u/s 43B of the Act. It was further stated that EPF of sum of Rs. 83,847/- was not paid before the relevant date and, therefore, was required to be disallowed. It was pointed out that the finding of learned Pr. CIT was factually incorrect. As per column no. 20b of tax audit report, a sum of Rs. 38,652/- was not paid by the assessee and this sum was already disallowed by the assessee itself. This was the part of disallowance of Rs. 83,850/-. Hence, he contended that the Ld. Pr. CIT did not verify the facts from records and he failed to appreciate the same in right perspective. 7. The law is well settled. The powers u/s 263 can be exercised if the order sought to be revised is erroneous inasm....