TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 648
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....ntractors undertaken by the Assessee in the Assessment Year 2018-19. 4. The Ld.PCIT has erred in ignoring the records of the assessment proceedings while passing the impugned order. It is submitted that in case the authority had perused the records of the assessment proceeding, it would have considered the merit in Appellant's submission that detailed enquiry and investigation was made by the LD AO qua expenses in form of payment to Sub-contractors on which TDS was deducted u/s 196C. 5. The Learned PCIT has erred in concluding that the assessment order passed by the AO is prejudicial to the interest of the revenue and is erroneous in the nature. 6. That the impugned order is contrary to the extant judicial position wherein it has been settled that the revisionary power by the LD PCIT/CIT can be held to be correct only if the LD CIT examines and verifies the transactions under question by himself and arrives at a finding on merits that the concerned order is erroneous and prejudicial to the interest of revenue. However, in the instant case, the LD PCIT has at the foremost, failed to even examine and verify whether the interest of revenue has been prejudiced. An examination....
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.... as erroneous is based on incorrect grounds, facts and reasoning and without considering the submissions of the assessee in both the assessment proceedings and under revisionary proceedings and without properly applying the mind to the facts and records of the case and therefore, the same deserves to be quashed. 11. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal." 2. The assessee company was engaged in the business of construction/contractor of PWD for construction of Road etc. The assessee filed its return of income for the year under consideration on 31.10.2018 declaring total income of Rs. 3,41,44,890/-. The case was selected for limited scrutiny assessment under e-assessment Scheme of 2019 on the issue of "Verification of Genuineness of Expenses". The assessment was completed u/s 143(3) r.w. section 143(3A) & 143(3B) of the Act on 06.03.2021 at total income by accepting the return income of the assessee. Thereafter, the Pr. CIT while examining assessment record found that the order passed by the AO is erroneous in so far as it was prejudicial to the interest of revenue as the AO did not examine certain aspect of the case properly....
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..... Even the AO also issued notice u/s 133(6) to the sub-contractors which shows that apart from the supporting evidences produced by the assessee the AO also called information and relevant details from the subcontractors to whom the assessee has shown the contract payments outstanding. He has then referred to the show cause notice issued by the Pr. CIT and reply of the assessee at page no.3 to 15 of the paper book which is also reproduced by the Pr. CIT at page no.3 of the impugned order. 3.1 In reply to the show cause notice issued u/s 263 the assessee has again explained all the details which were produced before the AO leaving no doubt that the AO conducted a proper inquiry on this issue. Ld. Counsel then contended that the assessment was framed as per e-assessment scheme of 2019 and the order passed by the AO was subjected to verification and approval of the higher authorities at e-assessment center and thus more than one income tax authority was involved in the assessment proceedings. The Pr. CIT has invoked the provisions of section 263 on the premises that the assessee has not produced supporting evidences relating to identity of these persons, their address, PAN, and other....
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....arished by disallowing the claim of expenses which is otherwise supported by the relevant evidences. 3.3 In support of his contention he has relied upon the decision of this tribunal dated 08.02.2024 in case of AL AS Real Estate and Developers Pvt. Ltd. vs. Pr. CIT in ITA No.181/Ind/2023 and submitted that this tribunal has considered an identical issue of assessment framed as per e-assessment scheme of 2019 on the identical issue of verification of genuineness of the expenses and held that the AO has made a proper inquiry and given a clear finding about the issue based on the various documents produced before the AO then invoking of provisions of section 263 by the Pr. CIT is not warranted on the ground that the AO failed to conduct an proper inquiry. He has further contended that once the AO has taken a possible view after proper inquiry and examination of the supporting evidences then the Pr. CIT is not permitted to invoke provisions of section 263 merely because he does not agree with the view taken by the AO. The Ld. Counsel then contended that even otherwise order passed by the Pr. CIT u/s 263 is not valid and liable to be quashed as the Pr. CIT himself was not sure about co....
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....the E-assessment Scheme, 2019 on the following issues:- S. No. Issues i. Verification of Genuineness of Expenses. The assessee filed its Return of Income for the A.Y. 2018-19 electronically on 31.10.2018 declaring total income Rs. 3,41,44,890/- .The case was selected for scrutiny for verification of issue(s) mentioned above." 5.1. Therefore, on the issue of verification of genuineness of the expenses the case was selected for scrutiny. In para 2 of the assessment order the AO has stated that notice u/s 143(2) & 142(1) were issued and in-compliance thereto, the assessee filed details and documents electronically which are considered. The AO has not given elaborate finding on the issue but recorded that on the basis of the Income Tax Return filed and submissions made by the assessee in the course of assessment proceedings the total income of the assessee is assessed to return income. The notice issued u/s 142(1) raised various quarries as under: "Sir/ Madam Mis, Subject: Furnishing of details and documents With respect to the amount paid during the year under consideration, on which tax has been deducted u's 194C of the Income-tax Act, you were requested vide notic....
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....NVPK2860D 173250 205000 2050 260330 0.00 Labour work Gajraj Singh CATPS8315P 28700 290000 2900 213690 0.00 Labour work Ghanshyam Soni GPEPS1649Q 0.00 1725640 17256 0 0.00 Labour work Priya Enterprises AZTPK3137A 350460 354000 3540 0 0.00 Labour work Vijay Shukla GPEPS1602P 0 1726840 17268 0 0.00 Labour work Yogendra Mishra BCKPM1300E 0 1872450 18724 0 0.00 Labour work Pawan Singh BJFPR5637F 70300 71050 711 0 0.00 Labour work 5.3 Thus, the assessee produced the PAN of all these subcontractors in whose names payments were made and expenditure was booked on account of sub-contract/ labour work. The assessee also produced ledger account of all sub-contractors. It is clear from the assessment order as well as notice issued u/s 142(1) and reply filed by the assessee along with supporting documents that the AO has conducted an inquiry on the solitary issue of verification of genuineness of expenses selected for limited scrutiny. Therefore, it is not a case of lack of inqiry on the part of the AO however, it may be a case of inadequate inquiry. The Pr. CIT invoked the provisions of section 263 by issuing a show cause noti....
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....; Vijay Shukla, Ghanshyam Soni & Yogendra Prasad Mishra primarily on the ground that the amount was not paid by the assessee during the year though the same was subjected to TDS u/s 194C as mentioned in para 3 of the show cause notice. The Commissioner has recorded that in the notice u/s 142(1) the assessee was asked to furnish the name, PAN address, E-mail ID of the sub-contractors however, the compliance of these pointes were not made. This statement of the Pr. CIT is in contradiction of the statement of the AO recorded in para 2 as under: "2. Accordingly, notices u/s 143(2) and 142(1) of the Income Tax Act 1961 are issued and duly served upon the assessee. In compliance thereof, the assessee filed details and documents electronically which are considered." Thus, the AO has specifically mentioned that in compliance of notice u/s 142(1) the assessee filed details and documents electronically which were considered. 5.5 The next observation of the Pr. CIT is that the AO issued letter u/s 133(6) to these three sub-contractors for providing details such as nature of service, PAN, copy of ITR etc. however, no compliance was made by any of the sub-contractor. This fact of issuing no....
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.... facts or not permissible under law. This Bench in case of AL AS Real Estate and Developers Pvt. Ltd. vs. Pr. CIT (supra) has considered an identical issue in para 10 & 11 as under: "10. We have considered rival submissions of both sides and perused the impugned order as well as the material held on record to which our attention has been drawn. On a careful consideration, we find that the AO has made a clear-cut finding in assessment-order Para No. 1 and 2 that the issue of scrutiny namely "Verification of Genuineness of Expenses" has been examined and no addition is made and the returned income is accepted. This finding by AO is fully supported from various documents placed in the Paper-Book as discussed in foregoing paras of this order, which clearly show that the AO has issued multiple questionnaires u/s 142(1) and made repeat enquiries to examine the expenses claimed by assessee in general and payments made to M/s AD Enterprises in particular. The assessee also filed complete replies to those questionnaires. To this extent, there cannot be any dispute or rebuttal by revenue. Clearly, therefore, it is discernible that the AO has considered those replies/submissions and thereaf....
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....ue notice u/s 133(6). But thereafter, non-response by the payee to the statutory notice directly issued by AO, is not within the reach and control of assessee. Hence, we are unable to understand as to how the assessment -order of assessee can be considered as erroneous for no fault of assessee. 11. In view of above discussions and for the reasons stated therein, we are persuaded to hold that the facts of the present case do not warrant application of section 263. Therefore, the revision-order passed by Ld. PCIT is not a valid order. We, thus, quash the revision-order and restore the original assessment-order passed by AO. The assessee succeeds in this appeal." 5.6 Thus, the Tribunal has given a finding that once the assessee has deducted substantial amount of TDS from the payments made to the parties and remitted to proceeds of TDS to Income Tax Department which also contains PAN of the parties then no response on the part of the parties to the notice issued u/s 133(6( cannot be attributed to the assessee for making the disallowance of claim or doubt the claim. 5.7 There is another aspect in this case regarding impugned order passed by the Pr. CIT when giving concluding finding....
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....anation filed by the assessee along with supporting evidence. Hence it is not a case of complete lack of inquiry on the part of the AO while passing the assessment order and therefore, the assessment order cannot be held to be erroneous so far as the prejudicial to the interest of the revenue on the ground of lack of inquiry. Though the commissioner has jurisdiction to invoke the provision of section 263 even when the AO has conducted inquiry and taken a view but the said jurisdiction and power of commissioner is restricted only in the case, where the view taken by the AO is absolutely wrong and against provision of law. No such allegation has been made by the Pr. CIT in the impugned order that the view taken by the AO in allowing the claims and accepting the explanation of the assessee is absolutely not permissible under the law. Even otherwise we find that the assessee has duly explained discrepancies in the total receipts declared by the assessee in comparison to the receipts appearing in form 26AS and explained the reasons with supporting evidence that the said difference is due to the time difference in recognizing the revenue by the assessee and booking of expenditure by the ....
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....ng Officer. Coordinate Bench of this Tribunal in case of Rakesh Khandelwal vs. Pr. CIT (Supra) while considering an identical issue has held as under: "8. Therefore, it is not the case where there was no enquiry at all by the A.O. The assessee had furnished certain evidences, which the assessing officer has gone through. There is no dispute that the Ld. Principal CIT can exercise the revisionary jurisdiction u/s 263 of the Act. If he considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. Explanation (2) to section 263 of the Act further clarifies that an order passed by the A.O. shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Principal Commissioner or Commissioner (a) the order is passed without making enquiries or verification which should have been made (b) the order is passed allowing any relief without enquiring into the claim (c) the order has not been made in accordance with the order, direction or instruction issued by the Board u/s 119 or (d) order has not been passed in accordance with any decision, which is prejudicial to the assessee ....
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....ecided whether or not the order is erroneous but has directed the A.O. to decide the aspect/question. The Hon'ble Court further held that this distinction must be kept in mind by the CIT while exercising jurisdiction u/s 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 sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the A.O., who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/enquiry. The order of the A.O. may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the A.O. to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT held and records reason why it is erroneous. An order will become erroneous because on remit, the A.O. may decide that order is erroneous. Therefore, CIT must after recording reasons, hold that order is erroneous the jurisdictional pre-condition st....
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....evant part of the said notice listing the issues identified for examination are as under :- "This is for your kind information that the return of income for Assessment Year 2015-16 filed vide ack. No. 134831180300316 on 30/03/2016 has been selected for Scrutiny. Following issues have been identified for examination :- i. Purchase of Property ii. Deduction claimed under the head Capital Gains 2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on 26/09/2016 at 11:00 AM in the Office of the undersigned." Thus it is clear that the case was selected for limited scrutiny on the issue of purchase of property and deduction claimed under the head Capital Gains. Both these issues are inter-connected as the deduction under section 54F was claimed by the assessee in respect of purchase of property and construction of residential house on the said land. The AO, thereafter issued notice under section 142(1) dated 14.07.2017 along with a questionnaire. These facts are also evident from the assessment order in para 1 and 2 as under :- "Thereafter, the cas....
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....ection 263 was limited ITA No. 246/JP/2020 Smt. Lata Phulwani, Jaipur. only on the issue of allowability of deduction under section 54F in respect of the agricultural land acquired by the assessee and used for construction of house. There was no allegation by the ld. PCIT about the lack of enquiry on the part of the AO while passing the assessment order. Even otherwise, it is clear from the assessment order that the case was selected for limited scrutiny only on the issue of investment made in the agricultural land and deduction under section 54F of the IT Act. Therefore, the question of lack of enquiry does not arise when the AO has taken up the scrutiny and issued the notice under section 142(1) along with a questionnaire calling for all the details relevant to the acquisition of the land as well as of construction of house. It is also not in dispute that the assessee produced the relevant details and evidences and specifically the purchase documents for acquiring the agricultural land as well as the valuation report towards the cost of construction. The ld. PCIT has also not doubted the facts as brought on record by the assessee and considered by the AO while passing the assessm....
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....tice. 6. Further, once it is not a case of lack of enquiry or inadequate enquiry as per the show cause notice issued under section 263 of the Act, then conducting a further enquiry on the factual aspects of the investment made in purchase of agricultural land and construction of the house is beyond the jurisdiction of the ld. PCIT as assumed by issuing show cause notice under section 263. The finding of the ld. PCIT in the revision order ought to have been confined on the issue of allowability of deduction under section 54F. Since the ld. PCIT was not agreeing with the view of the AO regarding the claim of deduction under section 54F, at the outset, he was required to give a concluding finding on the issue. On the contrary, the ld. PCIT has remitted the issue to the AO in para 7 as under :- "7. In view of the above I hold that the order passed by the AO in this case for the A.Y. 2015-16 on 18.12.2017 is erroneous in so far as it is prejudicial to the interests of revenue. The order dated 18.12.2017 passed u/s 143(3) of the Act deserves to be set-aside. AO will pass the order after taking into account all necessary facts and details connected with the claim of deduction u/s 54F ....
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....ourned for 23-1-1996. On 23-1-1996, the case was discussed and finalised. After that, assessment was completed by passing assessment order. These matters clearly indicate that the Assessing Officer particularly made reference to the matters, which the CIT has opined were not inquired. Thus, according to the Tribunal, the foundation to exercise power under section 263 of the Income-tax Act, was not existing. 8. We are of the opinion in the aforesaid circumstances on the finding reached by the Assessing Officer, no question of law really arises for consideration in this appeal. 9. It is true that in a given case not holding of any enquiry, which is relevant for assessment may indicate non-application of mind by Assessing Officer or furnish the ground for taking action under section 263 by the CIT. In this connection, reference may be made in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 831 (SC), wherein the CIT opined that the has passed the order of "nil" assessment without application of mind. The High Court accepted this part of the assertion made by the CIT in his order that the ITO has failed to apply his mind to the case in all perspectives and the order ....
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.... cancel the order of the AO and require the concerned AO to pass a fresh order in accordance with the law after holding a detailed enquiry. But when the enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of assessment, but the same is apparent from the record of the proceedings, the invocation of jurisdiction by the ld. CIT was unsustainable. A similar view has been taken by the Hon'ble Delhi High Court in case of ITO vs. D.G. Housing Projects Ltd. 343 ITR 329 in para 18 as under :- "18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, [2000] 243 ITR 83 / 109 Taxman 66 (SC), had observed that the phrase 'prejudicial to the interest of 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 interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views w....
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....icultural and not residential. (b) The construction of residential house without approval of plan by Govt. Authority. (c) The assessee has also not submitted any electricity and water connection evidence. (d) The land was registered in the name of assessee on 28-3-13 i.e. beyond the period specified in Section 54F (4) and so assessee not complied conditions laid down therein. The agreement to purchase land executed on 2-6-2011 claimed by assessee has no evidentiary value as payment of consideration shown in cash. (e) The bills for construction are lacking details and contain no detail of work done and each payment made therefor was in cash for less than Rs. 20,000/-. (f) The Inspector physically verified the property and found there is only boundary wall with gate and on whole land there was little construction, with walls and Tin shed roofing and construction is about 700-800 Sq.ft as against 1504 Sq.ft. construction claimed by assessee. The Ld. A.O. in assessment order gave scanned photographs stated to have been taken by Inpsector on site visit. The A.O. thus concluded that investment was purely in land and not a residential house as required u/s 54F of I. T. Act, 19....
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....ent from the valuation report of Regd. Valuer a copy of which is submitted. The Inspector of department furnished vague details without any physical inspection of building and took only photographs. The assessee has only to invest net sale consideration in purchase or construct a residential house and therefore registration or legal ownership is not necessary which is evident from Circular No. 471 dated 15-10-1986 issued by CBDT and from judgements of Balraj Vs. CIT 254 ITR 22 and CIT Vs. Laxmi Chand 211 ITR 804 and various other judgements on the issue. Thus, agreement to purchase copy of which submitted proves domain and control of assessee on the land in the hands of assessee and satisfies the connotation of purchase of land for construction of residential house. WE found from the record that the assessee had invested Rs. 1,15,00,000/-in construction of residential house and, therefore entitled to claimed deduction u/s 54F. The Ld. A.O. is wrong and has erred in law in disallowing the claimed deduction of Rs. 83,54,434/- u/s 54F the Act, which deserves to be allowed. 5. We found that in the previous year relevant to the above said assessment year the assessee invested a sum of....