AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 648
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....ain the genuineness in respect of expenses qua payment to Sub-contractors 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 e....
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....decision to treat the payments to sub- contractors as not genuine and, consequently to treat the assessment order 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 erroneou....
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....r and due inquiry was conducted by the AO and assessee produced sufficient supporting evidence to the satisfaction of the AO. 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 premise....
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.... some of the parties have not responded to the notice issued u/s 133(6(. The assessee cannot be held liable for the same and consequently cannot be parished 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 th....
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....ted scrutiny under e-assessment scheme of 2019 as recorded by the AO in para 1 as under: "1. The case was selected for Limited Scrutiny assessment under 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 o....
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.... Expenses booked Amount of TDS Payment made during 16-17 Payment made during 18-19 Details of work done 2017-18 Abhay Mishra CBHPM3381E 275220 278000 2780 218840 249975 Labour work Bhupendra Sharma ACWPS6320D 6415000 5645820 56458 0 0.00 Labour work Farid Khan BNVPK2860D 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 ....
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....as made to these sub-contractors even in the next financial year. The assessee failed to provide PAN, address or email Ids of these contractors despite repeated queries in this regard. Also, notices issued w/s 133(6) to these sub-contractors remained un-complied. Thus, the payments booked in the name of the said three sub-contractors, which are debited to Profit & Loss A / c cannot be treated as genuine." 5.4 Thus, the Commissioner has picked up the issue of expenses booked in the name of three persons ; 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 complianc....
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....n the very issue of genuineness of the expenditure and allowed the claim based on the facts as well as relevant material available on the assessment record. The view taken by the AO accepting claim of the assessee is a reasonable and a possible view. Therefore, the AO has taken a possible view after conducting inquiry on the issue. The commissioner can invoke the provisions of section 263 and revised the order of the AO but only when he comes to the conclusion that the order passed by the AO is either contrary to the 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 do....
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....The PAN so mentioned is verified and accepted as valid and correct by TDS Wing of Income-tax Department and that is why they have not created demand of higher amount of TDS u/s 206AA of the Act. Therefore, just by saying that the payee has not filed income-tax return, the authorities cannot punish the assessee. So far as non-response of notice u / s 133(6) is concerned, the assessee has very much discharged his duty by providing current address and current phone number of M / s AD Enterprises which has enabled the AO to issue 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 ap....
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....ht by the AO in the show cause notice issued u/s 142(1) of the Act. The AO even issued a second show cause notice dated 22.12.2019 asking the details regarding unsecured loans along with explanation in respect of disallowance u/s 14A r.w. Rule 8D. Finally the AO has made disallowance only u/s 14A and no disallowance or addition was made in respect of the other issues as raised in the show cause notice issued u/s 142(1) of the Act. Thus, it is clear that the AO has conducted an inquiry on these issues and was satisfied with the reply and explanation 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 b....
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....d which were subjected to TDS wherever applicable and the extra expenditure was incurred for the year was specifically explained by the assessee giving the specific reasons of consumption of electricity in development of site in the remote rural area as well as the expenditure incurred on acquiring equipment of machinery require for carrying out construction work. All these details were available with the AO as filed by the assessee, therefore, this case is certainly does not fall in the category of lack of inquiry on the part of the Assessing 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 th....
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....d and mandated further enquiry or investigation but the A.O. 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 A.O. who conduct further enquiries without a finding that the order is erroneous finding that order is erroneous the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the A.O. would imply and mean the CIT has not examined and decided 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. ....
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....w has been taken by the Jaipur Bench of the Tribunal in case of Smt. Lata Phulwani vs. Pr. CIT (supra) as under: "5. We have considered the rival submissions as well as the relevant material on record. We have carefully perused the assessment order passed by the AO under section 143(3), show cause notice issued by the ld. PCIT under section 263 of the Act as well as the impugned order passed under section 263. It is manifest from the record that the case of the assessee was taken up for limited scrutiny as per the notice issued under section 143(2) dated 19.09.2016, the relevant 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 inc....
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....ated 4th February, 2019 at pages 16 & 17 of the paper book as under :- Xxxxxxxxxxxxx Thus it is clear from the show cause notice issued under section 263 that the ld. PCIT has invoked the provisions of section 263 only on the issue of allowability of deduction under section 54F in respect of the investment made by the assessee towards cost of agricultural land and construction of house. The sole ground for initiating the proceedings under section 263 by the ld. PCIT is that in his view the claim of deduction in respect of agricultural land is not admissible. As apparent from the show cause notice that the scope of proceedings under section 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 ....
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....ope of the proceedings initiated under section 263 by issuing the show cause notice dated 4th February, 2019. In the said show cause notice, the ld. PCIT has raised only one issue i.e. purely a view regarding the allowability of the deduction under section 54F in respect of the investment made for construction of house on agricultural land. Whereas in the proceedings under section 263 the ld. PCIT has travelled beyond the scope of proceedings as initiated vide show cause notice dated 4th February, 2019. Therefore, the proceedings which are beyond the scope of the revisional proceedings, are not permissible as not an issue involved in the show cause notice. 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. S....
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.... details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, which the Assessing Officer desired to enquire into. The assessee has produced desired information by 15-11-1995. Thereafter, the case was adjourned to 22-11-1996 and 1-12-1995. On 5-12- 1995, the Assessing Officer studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid and the case was adjourned to 19-1-1996. On 19-1-1996, the Assessing Officer again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adjourned 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 reache....
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....e CIT is founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable. Consequently, the appeal fails and is hereby dismissed." Thus the Hon'ble High Court has held that the ld. CIT can 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 simil....
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....ndra Kumar Sharma vs. JCIT in ITA No. 358/JP/2015 wherein the Tribunal has held in paras 4 & 5 as under :- "4. We have heard and considered the rival contentions and perused the material placed on record. From the record, we found that the assessee claimed deduction of Rs. 83,54,434/- u/s 54F from the LTCG declared by it. The assessee made investment of Rs. 1,15,00,000/- in purchase of land and constructed residential house thereon. The area of land was 4090 Sq.mt. and construction thereon is of 1504 Sq. ft. The A.O. on these facts issued a show cause notice to assessee as given in assessment order to which assessee replied which is given in page -- 6 of assessment order. The A.O. on following grounds denied the claim of assessee: (a) The land is agricultural 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....
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....ithin the period specified in these sections. There is no need of approval of plan from competent authorities if construction is within limits on agricultural land and it is not a condition laid down in Section 54F for construction of residential house. The construction on land is meant for residential house. The assessee could complete the construction of the residential house within three years and if any facility lacking in the constructed residential house the same could be completed within in that period. There is water supply from well and temporary electric connection in the residential house constructed by assessee. The construction of residential house is 1553.50 Sq.ft. and not having proper bills for construction cannot be taken adversely against him for purposes of Section 54F. These facts are evident 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 f....
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.... well as the foregoing discussion about the settled principles of law laid down in various decisions, we hold that the impugned order passed by the ld. PCIT is not sustainable and the same is liable to be set aside." 13. Therefore, once the AO was satisfied with the supporting evidence produced by the assessee in response to the show cause notice u/s 142(1) then it is not necessary for the AO to give an elaborate finding on the issue. Accordingly, in the facts and circumstances of the case when the AO has conducted an inquiry then the Pr. CIT while passing the revision order cannot remand the matter back to the AO for passing afresh order simply because of the reason that the Pr. CIT himself was not sure about the correctness of the claim of the assessee. Therefore, once the order passed by the AO is not erroneous for want of inquiry then it is incumbent upon Pr. CIT to give conclusive finding that the order passed by the AO is not sustainable in law. Accordingly in the facts and circumstances of the case and following the various judgments of the Hon'ble High court as relied upon Coordinate Benches of the Tribunal sited (supra) the impugned order of the Pr. CIT passed u/s....