TaxTMI 
TaxTMI 
2025 (4) TMI 863
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....f the Act was conducted in the case of the assessee on 10.01.2019. In response to the notice issued u/s 153A(a) of the Act on 14.08.2019 the assessee filed its return of income on 04.01.2020 declaring total income of Rs. 3,24,13,780/-. The Assessing Officer completed the assessment u/s 153A of the Act on 22.04.2021 accepting the returned income of Rs. 3,24,13,780/-. 4. Subsequently, the Ld. PCIT on examination of records noted that the Assessing Officer has not inquired into the applicability of the provisions of section 43CA of the Act and addition of interest cost of Rs. 1,52,87,640/- to the cost of land despite the same being capitalized separately. He, therefore, was of the opinion that the order passed by the Assessing Officer has become erroneous and prejudicial to the interest of the Revenue for which he issued a notice u/s 263 of the Act to the assessee to explain as to why the order passed by the Assessing Officer should not be set aside in terms of provisions of Explanation (2) to section 263(1) of the Act. The relevant contents of notice read as under: "02. In the above mentioned case, on verification of case records for A.Y. 2018-19 it has been observed that the asse....
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....the Act in the case of M/s Shree Balaji Associates Pune LLP for A.Y. 2018-19 prima facie appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of the provisions of Explanation-(2)(a) to Section 263(1) of the Income Tax Act. I, therefore, intend to set aside/ modify the assessment order within the meaning of section 263 of the I.T. Act, 1961. An opportunity of being heard is therefore, given to you. You are requested to attend in person or through your authorized representative on 29.01.2024 at 03:00 PM in my office. 07. If you have authorized any representative to attend on your behalf, please ensure that the Power of Attorney with proper court fee stamp is filed on or before the date of hearing. If you do not wish to attend in person or through your authorized representative, you may file written submission along with necessary evidence in support of your contention before the due date of hearing. Further, it may be noted that no adjournment will be provided and in case on non appearance/non submission of reply, order will be passed on merits." 5. Rejecting the various explanations given by the assessee, the Ld. PCIT set aside the order pass....
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....nts are relied upon: * The Hon. Supreme Court in Rampyari Devi Saraogi v CIT 67 ITR 84 while taking note of the fact that the AO had concluded the assessment in "undue hurry" by passing a short, stereotyped assessment order, without making any inquiries, upheld the revision done by the CIT. * In the case of Deniel Merchants Pvt. Ltd. vs ITO dated 29.11.2017, the Hon'ble Supreme Court upheld the law as laid down by the High Courts in Subhlakshmi Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) etc. and held that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned. * In the case of Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC), Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263 was justified. * In the case of Vedanta Ltd.....
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....of proceedings under Section 263 of the Act. * Hon'ble High Court OF Karnataka in the case of CIT vs. Infosys Technologies Ltd. 341 ITR 293 dated 04.01.2012 has held that section 263 is a section which enables the Commissioner to have a look at the orders or proceedings of the lower authorities and to effect a correction, if so needed, particularly if the order or proceeding is erroneous and prejudicial to the interest of the revenue, It is also held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return. * Hon'ble ITAT Delhi Bench in the case of Ramesh Kumar, ITA No. 1982/Del/2018 for A.Υ. 2014-15 order dated 25.01.2019 has observed as under- * going through the facts, it can be observed that the Assessing Officer has not conducted any enquiry and this is a clear case of lack of enquiry not a case of inadequate enquiry. Further non application of mind by the Assessing Officer can be easily gauzed from the fact that the information available with the Assessing Officer has not been utilised during the as....
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.... We have also considered the various decisions cited before us. It is an admitted fact that the assessee had sold the land at Survey No.24 for a consideration less than the market value adopted for stamp duty purposes for which the provisions of section 43CA of the Act are squarely applicable. Although there is a difference as per the provisions of section 43CA of the Act of Rs. 38,32,312/-, the assessee had offered only an amount of Rs. 3,05,475/- and the Assessing Officer has not bothered to inquire about the same. Similarly, the issue relating to the addition of interest of Rs. 1,52,87,640/- to the cost of land despite debiting such interest as finance cost in the Profit and Loss Account remained to be examined by the Assessing Officer. Further, a perusal of the assessment order shows that it is a very brief order without touching the two vital issues pointed out by the Ld. PCIT. 8. We find the Hon'ble Bombay High Court in the case of Vedanta Ltd. vs. CIT (2021) 124 taxmann.com 435 (Bom) has held that where the assessment was completed without proper inquiries, the Commissioner was competent to invoke revisional jurisdiction and direct the Assessing Officer for fresh assessment....
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....it of Rs. 2,10,15,755/- during the course of search action conducted u/s 132 of the Act on 10.01.2019. However, in the return of income filed for the year under consideration the assessee had declared net profit of Rs. 1,56,45,352/- only. Further, the total cost incurred for Phase-I has increased from Rs. 81,46,76,053/- as on 10.01.2019 (date of initiation of search) to Rs. 90,12,74,680/- as on 11.02.2019 (date of completion of the project). Thus, the cost of the project increased to the tune of Rs. 8,65,98,627/- during the span of one month and it was submitted by the assessee that the books of accounts of the assessee at the time of the search action were not updated. He observed that neither the assessee had submitted any details / evidence to substantiate the total cost nor the Assessing Officer had raised specific query during the course of assessment proceedings to verify the increase of "total cost incurred for Phase-I" from Rs. 81,46,76,053/- to Rs. 90,12,74,680/-. He, therefore, issued a show cause notice asking the assessee to explain as to why the order passed by the Assessing Officer should not be set aside. The relevant part of the notice reads as under: "02. In the ....
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....al to the interest of revenue. 04. Considering the above facts of the case it is seen that the AO has not examined and verified the above issues and therefore income has been under assessed. Therefore, assessment order u/s 153A r.w.s 143(3) of the Act dated 22.04.2021 passed by the AO for A.Y. 2019-20 appears to be erroneous in so far as it is prejudicial to the interest of revenue. 05. In view of the facts and circumstances mentioned above, the assessment order passed u/s 153A r.w.s 143(3) of the Act in the case of M/s Shree Balaji Associates Pune LLP for AY. 2019-20 prima facie appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of the provisions of Explanation-(2)(a) to Section 263(1) of the Income Tax Act. I, therefore, intend to set aside/ modify the assessment order within the meaning of section 263 of the IT. Act, 1961. An opportunity of being heard is therefore, given to you. You are requested to attend in person or through your authorized representative on 29.01.2024 at 03:30 PM in my office. 06. If you have authorized any representative to attend on your behalf. please ensure that the Power of Attorney with proper court fee sta....
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....upreme Court upheld the law as laid down by the High Courts in Subhlakshmi Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) etc. and held that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned. * In the case of Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC), Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263 was justified. * In the case of Vedanta Ltd. Vs CIT[2021]124 taxmann.com 435(Bombay)/[2021] 279 Taxman 358 (Bom), it has been held that where assessment was completed without proper inquiries, Commissioner was competent to invoke revisional jurisdiction and direct Assessing Officer for fresh assessment. * In the case of Nagal Garment Industries Pvt Ltd Vs CIT [2020]113taxmann.com 4 (Madhya Pradesh) [03-04-2017], it has b....
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....g is erroneous and prejudicial to the interest of the revenue, It is also held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return. * Hon'ble ITAT Delhi Bench in the case of Ramesh Kumar, ITA No. 1982/Del/2018 for A.Υ. 2014-15 order dated 25.01.2019 has observed as under- On going through the facts, it can be observed that the Assessing Officer has not conducted any enquiry and this is a clear case of lack of enquiry not a case of inadequate enquiry. Further non application of mind by the Assessing Officer can be easily gauzed from the fact that the information available with the Assessing Officer has not been utilised during the assessment proceedings which makes the case fit for applying the provisions of explanation 2 (a) of section 263. * Hon'ble Delhi High Court in the case of Gee Vee Enterprises vs AddI. CIT 99 ITR 375 has clearly held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case. ITO should have made further inquiries before accept....
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...."New Town". Referring to pages 43 to 48 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply dated 11.02.2021 by the assessee to the Assessing Officer giving various details. Referring to pages 71 to 73 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the queries raised by the Assessing Officer in the notice issued u/s 142(1) of the Act wherein at query No.3 he has asked the assessee to furnish the working of profit of Rs. 2,10,15,755/- given during the search action. Referring to pages 74 to 80 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply given by the assessee on 23.03.2021 which was received by the JCIT on 24.03.2021. Referring to para 3 of the said reply, he drew the attention of the Bench to the working of profit of Rs. 2,10,15,755/- given during the search action. 17. Referring to pages 82 to 83 of the paper book, he drew the attention of the Bench to the queries raised by the Assessing Officer in the notice issued u/s 142(1) of the Act on 02.04.2021 wherein the Assessing Officer had specifically asked the following questions: "ANNEXURE Duri....
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.... FINE JEWELLERY (INDIA) LTD, ITA 296 OF 2013, (BOMBAY HC) 10. M/S. ANGRE PORT PRIVATE LTD. VS. PCIT, ITA NO 1025/PUN/2016 (ITAT PUNE) 11. M/S DWARKADHIS BUILDWELL PVT.LTD. VS CIT, ITA NO 3097/DEL/2014 (ITAT DELHI) 12. SANJAY AMRUTRAO SATAV (HUF) VS. ITO, ITA NO.200/PUN/2021 (ITAT PUNE) 13. M/S S.R. TRUST VS. THE PCIT, ITA NO. 213/CHNY/2022 (ITAT CHENNAI) 14. PCIT VS. DELHI AIRPORT METRO EXPRESS PVT. LTD, ITA NO. 705/2017 (DELHI HC) 15. TORRENT PHARMACEUTICALS LTD. VS. DCIT, I.T.A. NO. 164/AHD/2018 (ITAT AHMEDABAD) 16. ZAHURAHMED ABDULRAZZAK VALJIWALA VS.PCIT ITA NO. 76/AHD/2022 (ITAT AHMEDABAD) 17. PCIT VS. M/S, FORUM AGRO FOODS PVT. LTD, ITA 564/2019 (DELHI HC) 18. MALABAR INDUSTRIAL CO. LTD. VS CIT, C.A. 3646 OF 1993, (SUPREME COURT) 19. The Ld. DR on the other hand relied on the order of the Ld. PCIT. He submitted that the Assessing Officer in the instant case has not called for the requisite details nor the assessee submitted any details / evidence to substantiate the increase of the total cost. He submitted that the Ld. PCIT has given justifiable reasons while setting aside the order of the Assessing Officer. He accordingly submitted that the order of the Ld....
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....ounting to Rs. 4.23.00.549/- to be recognized for the concerns of the group for FY 2018-19. Entity-wise workings of net profit of the concerns of the group for FY-2018-19 are as under: Sr. No. Project Name of the entity F.Y. Amount of net profit 1 Fernhill Meenamani Ganga Builder LLP 2018-19 0 2 Florentina Shree Balaji Realty 2018-19 56,37,525/- 3 Amber Shri Siddhivinayak Developers 2018-19 1,56,47,260/- 4 New Town Shree Balaji Associates 2018-19 2,10,15,755/- Total Net Profit 4,23,00,549/- You are requested to explain whether above disclosure is disclosed by you in ITR filed for AY 2019-20. Please furnish the copy of same. 13. During the course of search at the office premises of Mr. Subhash S. Goel and his concerns at Ground Floor. 5, San Mahu Complex, Bund Garden Road, Pune, statement of Mr. Subhash Goel was recorded u/s 132(4) of the Act on 12.01.2019. In his statement, Mr. Subhash Goel was questioned to submit details of Work-In-Progress(WIP) of its all mojor concerns and details of revenue going to be recognized by following Percentage Completion Method of accounting by 31.03.2019. In reply to Q.No.36 & 37 of his aforesaid statement. he....
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..... We find the assessee vide reply dated 23.03.2021 has given the working of profit of Rs. 2,10,15,755/- during the search action. We find again the Assessing Officer vide annexure to the notice dated 02.04.2021 issued u/s 142(1) of the Act has raised the following query: "ANNEXURE During the search action u/s. 132 of the Act carried out in your case on 10/01/2019 and subsequent dated, you had worked out sales to be offered to tax for F.Y. 2018-19 by following Percentage Completion Method(PCM) of accounting and had submitted net profit amounting to Rs. 2,10,15,755/- to be recognized in the case of assessee M/s. Balaji Associates (w.r.t. project New town). However, in perusal of the return of income and the financial attached, it is seen that you have declared net profit of Rs. 1,56,45,350/- instead of Rs. 2,10,15,755/-. Therefore, you are requested to explain the reason for showing less profit of Rs. 53,70,405/- along with supportive documents to prove the same. SWAPNIL SHARADRAD PATIL CENTRAL CIRCLE 2(3), PUNE" 24. We find the assessee vide reply dated 10.04.2021, copy of which is placed at page 84 of the paper book has submitted as under: SHREE BALAJI ASSOCIATES PUNE LLP....
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....t the time of search action and final revenue recognition working based on which return of income is filed Kindly take note of the above information and oblige For Shree Balaji Associates Pune LLP, Sd/- (Authorized Signatory)" 25. From the above, it is seen that the Assessing Officer during the course of assessment proceedings has raised the queries to which the assessee has made its submissions and the Assessing Officer has passed the order thereafter. Under these circumstances, we have to see as to whether the Ld. PCIT/CIT can invoke jurisdiction u/s 263 on an issue for which specific queries were raised by the Assessing Officer and for which the assessee has given the detailed reply. 26. We find the Hon'ble Bombay High Court in the case of CIT vs. M/s. Fine Jewellery (India) Ltd. (2015) 372 ITR 303 (Bom) at para 8 of the order has observed as under: "8. We find that the impugned order of the Tribunal does record the fact that specific queries were made during the Assessment proceedings with regard to details of expenditure claimed under the head "miscellaneous expenses" aggregating to Rs. 2.94 crores. The respondent-assessee had responded to the same and on considera....
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....ssue of allowability of legal and professional charges of Rs. 10 lakhs. The Hon'ble Jurisdictional High Court in the case of Aker Powergas Pvt. Ltd. (supra) clearly held that even though the legal expenses are incurred in connection with the capital asset, the same are allowable as revenue expenditure after referring to the decision of the Hon'ble Madras High Court in the case of Bush Boake Allen India Ltd. (supra) wherein the Hon'ble Madras High Court following the decision of the Hon'ble Supreme Court in the case of India Cements Ltd. vs. CIT, 60 ITR 52 held that merely because the expenditure was incurred in connection with the capital assets, the same cannot be treated as capital in nature. It is settled principle of law that once the High Court lays down particular the proposition of law, the same is deemed to be in existence from the inception. Fact would clearly suggest that there was no material on record to hold that the legal and professional expenses of Rs. 10 lakhs are not allowable as revenue expenditure. Therefore, the law enunciated by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) is clearly applicable to the facts of the case and the A....
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....k 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. --- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the rec....
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....atu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words: "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or....
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....exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue." 12.7 The Supreme Court in another recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revisional order making addition to assessee's income under section 69A in respect of onmoney receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Princip....
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....ness expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court's order was liable to be dismissed. The facts of this case were that in course of assessment, Assessing Officer allowed assessee's claim for deduction of certain expenditure on purchase of CDs on Jain Religion by expending an amount of Rs. 10.4 crores, after due examination. The Commissioner passed revisional order holding that Assessing Officer had not carried out any enquiries as to nature of expenditure being capital or not. The Tribunal, however, allowed assessee's appeal holding that Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The High Court upheld order passed by Tribunal. The Supreme Court on consideration of above facts held that SLP filed against High Court's order was to liable to be dismissed. The Supreme Court made the following observations, while passing the order: "It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order ....
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....s queries raised vide the various notices, in our view it is a well settled position of law that if from the assessment records, it is evident that the Ld. AO has made due enquiries in response to which assessee has filed its submissions, then even if the assessment order does not discuss all aspects in detail with regards to claim of the assessee, it cannot be held that the order is erroneous and prejudicial to the interests of the Revenue. The above proposition has been upheld in the case of CIT v. Reliance Communication 69 taxmann.com 109 (Bombay), Smt. Anupama Bharat Gupta v. ITO in ITA 1685/Ahd/ 2018, Goyal Private Family Specific Trust [1988] 171 ITR 698, CIT v. Mahendra Kumar Bansal [2008] 297 ITR 99 (All.) (para 10) etc. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. The Grounds of appeal raised by the assessee are thus allowed." 29. The various other decisions relied on by the Ld. Counsel for the assessee placed in the paper book also supports his case to the proposition that when the Assessing Officer had raised specific queries on an issue and the assessee had given the reply to the same and the Assessing ....