TaxTMI 
TaxTMI 
2023 (7) TMI 1324
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.....AO during the assessment proceedings. 4. That, the Ld. PCIT, Indore-1 erred to pass an order u/s 263 of the Act, without issuance of show cause notice and in hurriedly manner within a time of 20 days from the issuance of first notice dt. 25.02.2022. 5. That, the appellant, carves leave to add, amend or modify any of the grounds of the appeal." 2. The assessee company is engaged in the business of infrastructure activity of construction of road, bridge, building and other works as well as sale of agricultural produce and giving the machinery on hire. The assessee filed its return of income u/s 139(1) of the Act on 29.10.2017 declaring total income of Rs. 74,73,400/-. E-return was selected for scrutiny under CASS and assessment u/s 143(3) of the Act was completed on 26.12.2019 at the total income of Rs. 76,68,400/-. Subsequently, the AO also passed a rectification order dated 30.07.2020 and rectified the mistake of double disallowance of Rs. 1,20,000/- in respect of Tipper Transportation penalty which was also added back to the total income by the assessee itself. Thereafter, the Pr. CIT on examination of the assessment record noticed certain discrepan....
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....TDS on the same in A.Y.2016-17. The Ld. AR has referred to the Form No. 26AS for both assessment years i.e. A.Y.2016- 17 & 2017-18 to show that the assessee has declared the entire amount as turnover if the consolidated figure of two years as shown in form 26AS is taken into consideration. 4. He has further submitted that all these details were produced before the AO in response to show cause notice issued by the AO u/s 142(1) and this exercise of verifying the difference in the receipt appearing in form No. 26AS and in the books of account of the assessee was also done by the AO during the assessment proceeding for the year under consideration as well as during the assessment proceedings for the preceding assessment years. The Ld. AR has submitted that this issue is a recurring issue for the past several years due to the difference for recognizing the revenue by assessee and expenditure booked by the contractee at different point of time. He has referred to the notice issued by the AO u/s 142(1) and submitted that AO has specifically asked all the relevant details regarding the receipts declared by the assessee for assessment years 2014-15 as well as 2015-16. The Asse....
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....ect expenses incurred as well as higher charges of machinery which was subject to TDS. The value of closing stock (work in progress) was calculated by the assessee company on the basis of work completed and amount of material purchased and consumed. The bills in respect of the purchases were required to be submitted to the concerned department only when the work is completed till the stage of 10% of the work completion of total work. Therefore, as per agreement the assessee was not allowed to submit the bills till the stage of 10% of total work completed is achieved. 6. He has referred to the details of the payments to the contractors at page No. 112 to 123 of the paper book which contains the particulars of payment along with ledgers, bills and vouchers duly produced before the AO. The AO specifically called the details regarding material consumption while issuing show cause notice u/s 142(1) dated 22nd December 2019 and therefore, the issue of disproportionate expenditure in comparison to the preceding year has been duly examined by the AO. The assessee explained the reasons for higher percentage of expenditure to the turnover for the year under consideration in its reply....
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....e total debtors as given in the details furnished before the AO are not matching with the debtors shown in the balance sheet. Ld. DR has further submitted that the assessee has explained the details vide letter dated 24.12.2019 just two days prior to the assessment order was passed. This shows that no proper inquiry was conducted by the AO on these issues. The AO has discussed only disallowance made u/s 14A of the Act and there is no discussion on other issues as pointed out by the Pr. CIT in the show cause notice. Therefore, it is a case of lack of inquiry on the part of the AO while passing the assessment order. He has relied upon the impugned order of the Pr. CIT. 9. We have considered the rival submissions as well as relevant material on record. The Pr. CIT issued show cause notice u/s 263 on 25.02.2022 and passed the impugned order on 15.03.2022. The assessee was given only seven days to file the reply to the show cause notice. In compliance to the show cause notice the assessee filed reply and also requested the Pr. CIT to allow the assessee to produce the voluminous record in the physical form but due to paucity of time as the limitation was gone to expire on 31.03.2022 t....
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....3.3 On perusal of the P&L account of the assessee company for the period under consideration, it was found that the assessee had claimed Rs: 11.85,50,529/- under the head Material Consumed expenses as against total turnover of Rs. 22,08,86,850/- during the year under consideration whereas during the previous year turnover of the company was Rs. 10,35,02,751/- and the assessee company has claimed Rs. 2,08,15,446/- under the same head. thus, it is clear that turnover of the company just doubled but surprisingly the expenses under the same head was increased by six times approximately. The assessing officer has not verified these expenditures during the course of assessment proceedings neither the assessee had furnished supporting documents in support of his claim. Similarly, Rs. 33,92,359/- was claimed as site expenses which almost three times from the amount which was claimed in previous year, Rs. 50,17,438/- was claimed under the head electricity expenses however no such expense was claimed during the previous year, Rs. 10,32,070/- was claimed as freight expenses which is almost five times of the amount which was claimed during the preceding year, Rs. 2,63,53,247/- was claimed as F....
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....r u/s 263 of the Act. The sole ground for setting aside the order passed by the AO is lack of inquiry on the part of the AO in respect of these issues. However, we find that the AO issued show cause notice u/s 142(1) and specifically asked the assessee to furnish details and evidence in respect of these issues as taken up by the Pr. CIT while invoking provision of section 263 of the Act. For ready reference we reproduced the notice issued by the AO u/s 142(1) dated 06.12.2019 along with annexures as well as notice dated 24.12.2019 as under: 11. As it is apparent from the annexures to show cause notice issued by the AO u/s 142(1) that the AO issued a detailed questionnaire to the assessee for providing the necessary details, record and evidence. The AO even given a specific format in respect of each details to be provided by assessee which covered all these issues as raised by the Pr. CIT in the show cause notice issued u/s 263 of the Act. The assessee duly complied with the show cause notice issued by the AO by filing to detail reply along with relevant details and documents which runs into 100 of the pages, therefore, for the sake of brevity we are not reproduced the reply and ....
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....red by the assessee in the preceding year with the supporting bills and TDS which was deducted by the payee in the preceding year as well as for the year under consideration. Therefore, if the TDS details for two years are taken into consideration it goes to prove that only because of the difference of time in deducting the TDS by contractee the discrepancies appears in respect of the receipts as shown in the form 26AS and turnover declared by the assessee. All these details were produced by the AO and this is a recurring issue as already examined before the AO in the preceding assessment years. The AO did not feel any need to give an elaborate finding on this issue. The assessee has produced copies of the assessment order passed u/s 143(3) for A.Ys. 2014-15 & 2015-16 wherein an identical issue was considered by the AO and after examining of the record and explanation of the assessee the AO accepted the claim of the assessee. Once it is a recurring issue and already examined in the preceding years and AO has duly conducted an inquiry by issuing show cause notice u/s 142(1) which was duly replied by the assessee with relevant record then the AO was not expected to give an elaborate ....
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....uiry on the material placed on record. The issue regarding whether the assessment order is erroneous or prejudicial on the ground of insufficiency of enquiry has been dealt by the Hon'ble Delhi High Court in the judgement of ITO Vs. DG Housing Projects Ltd. (2012) 20 Taxmann.com 587, which has been followed by this Tribunal in various cases. Hon'ble High Court while adverting to the issue held that in cases of wrong opinion for finding on merit, the CIT has to come to the conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required and necessary before the order u/s 263 of the Act is passed. In such cases, the order of the A.O. will be erroneous because the order passed is not sustainable in law and the said finding must be recorded CIT cannot remand the matter to the assessing officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/enquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the A.O. ....
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....rial which evidence to show and state that the order of the A.O. is erroneous. We find that Ld. CIT in the present case has not carried out any enquiry of his own has merely set aside the assessment to the file of the A.O. to reexamine issue of source of cash deposited by the assessee. Therefore, it is contrary to the guidelines as mandated in the Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd. (supra) coupled with the fact that the assessee during the assessment proceedings had submitted evidences in support of sale of jewelleries and receipt of gift. Moreover, the issue of examination of source of gift was not subject matter of the scrutiny. Therefore, the decision of the Ld. CIT invoking provisions of section 263 of the Act is not justified and cannot be sustained under the facts and circumstances of the present case. We therefore, set aside the impugned order and allow the grounds raised by the assessee." 12. Once AO has conducted an inquiry which may be inadequate inquiry but in that case it cannot be said that the order passed by the AO is erroneous due to complete lack of inquiry. Once the AO has conducted an inquiry and take....
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....ended the proceedings from time to time and furnished required details/documents and also produced books of accounts, which were examined on test check basis. The case was discussed with him. 2. The assessee earned income from capital gain and interest. During the course of assessment proceedings written submissions were filed placed on file and other details were produced which were examined on test check basis. After discussion with the A/R of the assessee, the returned income is accepted." Thus in response to the notice issued under section 142(1), the assessee attended the proceedings through her A/R and also furnished the required details/documents as well as books of account which were examined by the AO. There is no dispute that the AO has conducted the enquiry on the issue for which the case was selected for scrutiny and after satisfying himself the AO finally concluded that the assessee earned the income from capital gain and interest. The details and records produced before him were examined and thereafter the returned income is accepted. Thus it is not a case of lack of enquiry on the part of the AO. Though the AO has not discussed the issue in elaborat....
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....e order of the AO as erroneous so far as prejudicial to the interests of the revenue. However, when there is no allegation and even otherwise it is manifest from the record that this is not a case of lack of enquiry on the part of the AO but the AO after satisfying himself about the claim of deduction under section 54F consequent upon the examination and verification of the concerned details, evidences and books of account produced by the assessee, allowed the claim of the assessee. Further, though the ld. PCIT has not alleged that there is inadequate enquiry on the part of the AO, however, even in case there is inadequate enquiry on the part of the AO, the ld. PCIT can give a concluding finding while passing the revision order after considering the complete record as well as conducting a necessary enquiry. In this case the assessee has contended before the ld. PCIT that the claim of deduction under section 54F is eligible even if the residential house is constructed on the agricultural land. The crux of the argument of the assessee has been reproduced by the ld. PCIT in para 5 of the impugned order. Thus the assessee has cited various decisions in support of her claim. The ld. PCI....
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....f the claim and has remanded the matter to the record of the AO for passing a fresh order. Hence he has not given a concluding finding whether the order of the AO allowing the claim of deduction under section 54F after conducting an enquiry is absolutely against the provisions of law. Once it is not a case of lack of enquiry on the part of the AO, the said order cannot be held to be erroneous unless the ld. PCIT holds and records the reason why it is erroneous. The pre-condition for invoking the jurisdiction under section 263 is that the ld. PCIT must come to the conclusion that the order of the AO is erroneous and is unsustainable in law. When the order passed by the AO is not erroneous for want of an enquiry, then it is incumbent upon the ld. PCIT to give a concluding finding and reasons that the order is not sustainable in law. An identical issue was considered by the Hon'ble Jurisdictional High Court in case of CIT vs. Ganpat Ram Vishnoi, 296 ITR 292 (Raj.) in para 7 to 12 as under :- "7. In this connection, it would be relevant to refer to the material which was relied by the Tribunal to set aside the order of the CIT. The Tribunal noticed that as per the record o....
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....edings, in the present case, no presumption can be drawn that the Assessing Officer had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the Assessing Officer was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction under section 263 of the Income- tax Act. 11. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, wit....
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....tainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue." The Hon'ble High Court has laid out a fine distinction between the orders where no enquiry has been made by the AO from the order based on inadequate enquiry. Therefore, where the AO has made an enquiry and taken a possible/permissible view, then the said order cannot be treated as erroneous and prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. The Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) has held that an order of ITO cannot be treated as prejudicial to the interests of the revenue if the ITO adopted one of the course permissible in law and it has resulted in loss of revenue or two views are possible and the ITO has taken one view with which the ld. CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. As it is clear fr....
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....done was agriculture in nature. Reliance is placed on the judgements in case of Vishnu Trading Co. 259 ITR 724 (Raj.), Narendra Mohan Uniyal 34 SOT 152 (Del.), Shyam Sunder Mukhija Vs. ITO 38 ITD 125 (JPR) and ACIT Vs. Om Prakash Goyal (2012) 53 SOT 158 (JPR). In the case of Narendra Mohan Uniyal (Supra) it is held that "It is crystal clear from the plain reading of ss. 54 and 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no any rider under s. 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption on such investment. In this connection reference may be made to Cir. No. 667 dated 18- 10-1993 (204 ITR (ST) 103) issued by CBDT which has clarified that for the purpose of computing exempti....
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....said investment in the land; copy of the agreement to purchase and registered purchase deed were verified before the A.O.. The assessee got constructed a residential house in the F.Y. 201213 i.e. within the statutory time limit allowed by the Act i.e. before the due date of February, 2014. Copy of bills for construction of house alongwith Map of the house was filed before the A.O.. The total area of land is about 4090 sq.mtr. and the constructed area is about 1504 sq.ft. No approval is required for construction of the above said residential house. Copy of registered sale deed is also filed before the A.O. We found that it was a residential unit, therefore, the assessee is entitled for claim of deduction U/s 54F of the Act amounting to Rs. 83,54,434/-." Thus it is clear that the Tribunal has referred and relied upon various decisions on the point of allowability of deduction under section 54/54F of the Act in respect of the investment made in construction of house on agricultural land. Therefore, the view taken by the AO is a possible view though may not be the only view. Further once the issue of allowability of deduction under section 54F is a debatable issue and the AO h....
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....ed in the prescribed manner under Rule 14 of I.T. Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 05/11/2019 at 11:00 AM. c) The above mentioned evidence/information is to be furnished online electronically in 'E-Proceeding' facility through your account in 'e-filing' website of Income Tax Department. d) Para(s) (a) to (c) are applicable if you have an account in e-filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually. Yours faithfully, AMIT KUMAR SONI DCIT/ACIT 3(1), IND Note If digitally signed, the date of digital signature may be taken as date of document. ROOM NO:306,3rd Floor, AAYAKAR BHAWAN, OPP. WHITE CHURCH, WHITE CHURCH ROAD, RESIDENCY AREA, INDORE, Madhya Pradesh. 452001 Email: [email protected], Office Phone:07312494018 The Notice/L....
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.... & PAN Name, address of Sr.No. the party Amount of Rate of Commercial Reason for loans advances given and interest (%) expediency not charging Interest, if any 6. Please furnish the details of Contractual amount paid in the following format: Name, Contractual Address, PAN amount of the Party (Rs.) Page 3 of 4 TDS Rate of TDS Nature Paid service Page 4 of 525 of Reason for non deduction rendered of TDS, If any 7. Please furnish the details of Fixed assets purchased by your concern during the year under consideration alongwith the bill/vouchers for verification of the same. 8. Please give the details of direct expenses of land cost of sold flats. 9. Please furnish the valuation of closing stock WIP alongwith the documentary evidences. 10. Please justify the reason for high Refund to TDS for the period under consideration. 11. The assessee is running real estate business and disclosing high closing stock. Please justify the same. 12. Please furnish books of accounts for verification. Page 4 of 4 AMIT KUMAR SONI DCIT/ACIT 3(1), IND (In case the do....