TaxTMI 
TaxTMI 
2024 (7) TMI 954
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....e assessment record was subsequently called for by the PCIT wherein it was noticed that the assessee had claimed business promotion expense of Rs. 5,12,01,872/- which was in the nature of freebies/monetary grant for promoting its products. According to the Ld. PCIT, this business promotion expense was required to be disallowed which was not done by the AO and, therefore, the order of the AO was erroneous and prejudicial to the interest of the revenue. Accordingly, a notice under Section 263 of the Act was issued by the PCIT on 17.02.2023 and after considering the reply of the assessee, the Ld. PCIT passed order under Section 263 of the Act dated 25.03.2023 setting aside the order of the AO for passing fresh order after making necessary enquiries relating to business promotion expenses. According to the Ld. PCIT the explanation of the assessee was not satisfactory and contrary to the provision of Section 37 of the Act, which required disallowance of the claim. 3. Aggrieved with the order of the PCIT, the assessee is in appeal before us. 4. The assessee has taken the following grounds in this appeal: "1. The order passed by the PCIT is bad in law and needs to be quashed. It is su....
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....he assessee. The Ld. AR explained that the details of business promotion expense was called for and examined by the AO in great detail and after examining the nature of expenditure and the explanation of the assessee, the AO had taken a conscious decision that no disallowance was called for in respect of these expenses. The Ld. Counsel contended that when the matter was examined in-depth by the AO, the Ld. PCIT was not correct in initiating proceedings under Section 263 of the Act on the ground that the matter was not examined by the AO. He also pointed out that the Ld. PCIT had not invoked the provision of Explanation2 to Section 263 of the Act in the notice under Section 263 of the Act. He has placed reliance on the following decisions in support of his contention that the order of the AO was not erroneous and prejudicial to the interest of the Revenue and, therefore, the order under Section 263 of the Act passed by the Ld. PCIT should be quashed. i. CIT vs. Kamal Galani, [2018] 95 taxmann.com 261 (Gujarat) ii. CIT vs. Kamal Galani, [2019] 110 taxmann.com 213 (SC) iii. PCIT vs. Shree Gayatri Associates, [2019] 106 taxmann.com 319 SC) iv. Diamines & chemicals Ltd. vs. PCIT....
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....f so, how this fact was brought out in the order under Section 263 of the Act passed by the Ld. PCIT. 9. The Ld. PCIT has observed in the notice under Section 263 of the Act dated 17.02.2023 that the business promotion expense claimed by the assessee was in the nature of freebies/monetary grant for promoting products and was required to be disallowed. Further that the AO had passed the assessment order without making proper enquiry and the required addition in respect of this claim. It is not apparent as to on what basis the Ld. PCIT had arrived at such conclusion. It is found that the assessee has debited business promotion expenses of Rs. 5,12,01,872/- in Schedule 20 of its P&L account. The AO vide notice under Section 142(1) of the Act dated 18.01.2020 had called for details of sales promotion expenses alongwith the documentary evidences. In response, the assessee had filed the reply dated 22.01.2020, whereby the details of these expenses was furnished and nature thereof was also explained. Thereafter, the AO had issued another notice under Section 142(1) of the Act dated 28.01.2020 and the details of sales promotion expenses was called for in specific format, which was furnish....
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....rought on record in the course of assessment proceeding. The observation of the Ld. PCIT that this payment was in the nature of grant to Doctors and that no TDS was made on these payments is, therefore, not found correct. The Ld. PCIT has relied upon CBDT Circular No.5//2012 and the Supreme Court judgement in the case of Apex Laboratories (P) Ltd v DCIT 135 taxmann.com 286 in her order. To invoke the applicability of CBDT Circular and the Apex Court decision, it has to be first established that freebies were given to medical practitioners, only thereafter the disallowance can be made in respect of such freebie and payment made to the Doctors. When the matter was examined by the AO in the course of assessment proceedings and no freebie was found to be provided to the Doctors, there was no question of any disallowance in accordance with the Board's Circular, under Section 37 of the Act. 12. It has been held by the Hon'ble Jurisdictional High Court in the case of CIT vs. Kamal Galani (supra) that once the Assessing Officer carried out detailed inquiries, it was not open for the Commissioner to reopen the issue on mere apprehension and surmises. The Explanation-2 to Section 263 of the....
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....ons of Section 263 although appears to be of a very wide amplitude and more particularly after insertion of Explanation 2 but cannot possibly mean that recourse to Section 263 of the Act would be available to the Revisional Authority on each and every inadequacy in the matter of inquiries and verification as perceived by the Revisional Authority. The Revisional action perceived on the pretext of inadequacy of enquiry in a plannery and blanket manner must be desisted from. The object of such Explanation is probably to dissuade the AO from passing orders in a routine and perfunctory manner and where he failed to carry out the relevant and necessary inquiries or where the AO has not applied mind on important aspects. However, in the same vain where the preponderance of evidence indicates absence of culpability, an onerous burden cannot obviously be fastened upon the AO while making assessment in the name of inadequacy in inquiries or verification as perceived in the opinion of the Revisional Authority. It goes without saying that the exercise of statutory powers is dependent on existence of objective facts. The powers outlined under s.263 of the Act are extraordinary and drastic in na....