TaxTMI 
TaxTMI 
2025 (6) TMI 37
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther erroneous nor prejudicial to the interest of the revenue, the PCIT has erred on facts and in law in holding it to be otherwise, the order passed u/s 263, be quashed. 3. Because the order passed u/s 143(3) r.w.s. 144B was the result of the case being selected under CASS and the assessment being framed after deep scrutiny accompanied with detailed questionnaire, all the issues being examined, the PCIT has erred on facts and in law in holding the same to be erroneous and prejudicial to the interest of the revenue, the order passed u/s 263 is bad in law, be quashed. 4. Because the order passed u/s 143(3) r.w.s. 144B, having being passed after scrutiny of the accounts and the documents filed is neither a case of no enquiry nor lack of enquiry or inadequate enquiry, the order passed by the PCIT u/s 263 is bad in law, be quashed. 5. Because the PCIT has failed to make any independent enquiry which is the core mandate of section 263 nor has demonstrated as to how the order is erroneous or prejudicial to the Interest of revenue, failure to conduct independent enquiry by the PCIT makes the order passed u/s 263 bad in law, the same be quashed. 6. Because without prejudice to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion and Rs. 23,04,000/- towards directors remuneration. The assessee was liable to deduct TDS u/s 194H and 194J of IT Act, 1961 but the same was not done. The copy of 3CD is also not placed in file. Hence, 30% of the above said amount Rs. 27,93,292/- [(30% of Rs. 93,10,972/-) (70,06,972/- + 23,04,000/-] was required to be disallowed and added back to the total income of the assessee. The AO has not examined the issue of deduction of TDS u/s 194H and 194J of IT Act, 1961 of the Act on payment of Rs. 93,10,972/- (70,06,972/- plus 23,04,000/-) on commission and directors remuneration. From the above, it is clear that the AO has failed to examine the issues/facts while completing the assessment. In view of above facts, the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue and is liable to be set aside under the provisions of section 263 of the I.T. Act 1961. You are hereby given an opportunity to explain as to why the assessment order passed by the Assessing Officer should not be set aside and a fresh order may be passed in light of above observations as material available on record. You are required to submit your replies and explanatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has not made necessary verification to ascertain genuineness of payment of salary to employee to the extent of Rs. 13,20,000/-. Before allowing the aforementioned expenses, the FAO was required to verify that services had been actually rendered by such person to whom salary was paid. Further, the FAO needed to ensure that the above employees were not covered under Section 40A(2)(b) of the I.T. Act, 1961. In view of the facts mentioned above, it is clear that the assessment order passed by AO is erroneous as well as prejudicial to the interest of the revenue. Accordingly, in exercise of the power u/s 263 of the IT Act, 1961 I set aside the order passed by the FAO u/s 143(3) r.w.s 144B of IT. Act, 1961 on 21.04.2021 for A.Y. 2018-19. The Assessing Officer is directed to pass a fresh assessment order, after considering all the facts of the case and the Observations above and after providing an opportunity of being heard to the assessee, within the time limit as given in the Income Tax Act, 1961." (B.2) For the ease of reference, the written submissions filed by the assessee in the office of the Ld. PCIT are also reproduced as under: - "The impugned notice u/s 263(1) has been issue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se has been made. 3. Nature of the item 4. Quantity Para 7. Provided following details of the commission paid: e Basis for current year. Basis for last year. Date on which commission has been paid. Amount TDS deducted." 3. That in response to the query at SI. No.5 and 7, the assessee filed complete details vide letter e-filed on 31/01/2021 alongwith complete detail of party wise commission paid and tax deducted thereon together with date of deposit of TDS. A perusal of the detail would show that assessee company has deducted tax at source u/s 194H where ever applicable i.e. in those cases where commission paid to the party is less than Rs. 15,000/- no tax was deducted in accordance with provision contained in section 194H. The aforesaid details were placed at Annexure B of the reply. Extracts from reply e-filed on 31/01/2021 are also reproduced herein below: "Point No.7 1....................................... 2. In respect of commission expenses claimed in the accounts of the company, the assessee disclosed gross sales of Rs. 2,93,97,138.37/-. From the list of parties to whom goods were sold and as furnished by assessee. Among the various expenses incurred ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 9,84,000 The accounting system followed by the assessee in respect of payment of salary & wages is as follows: (i) Salary of directors and other employees (excluding Medical representatives) is debited under the head "salary & wages others' (ii) Salary of Medical representatives is debited under the head "Salary A/c (M.R.) others'. (iii) Incentives to Medical representatives is debited under the head Incentive. In the account 'salary & wages other" apart from salary to directors Rs. 9,84,000/-, salary of following employees was also debited: Richa Gupta Rs. 6,00,000/- Pratima Gupta Rs. 3,60,000/- Om Gupta Rs. 3,60,000/- Total Rs. 13,20,000/- In view of above facts, Director's remuneration is Rs. 9,84,000/- and not Rs. 23,04,000/-. 8. During the course of assessment proceedings the Assessing Officer vide his letter dated 20/01/2021 (already enclosed as Annexure-3), required following details from the assessee: "1. Kindly provide the ledger copy of the Salary & Wages and commission paid to your staffs/ agents. If anyone received an amount of Rs. 50,000/- and above per month as a Salary/ Awvages/ commission, kindly submit his/her or its PAN, e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14 herein fore and Annexure-7) refund is due in their cases. Therefore also no disallowance could be made u/a 40a(ia) as assessee company is not deemed to be default under the first proviso to section 201(1) - kindly refer second proviso to section 40a(ia) as reproduced herein fore. 16. That a perusal of submissions at para 13 to 15 would show that on facts too no disallowance u/s 40a(ia) could be made. In any way it is clear that no prejudice has been caused to the revenue. 17. That the allegation that tax Audit Report in form 3CD is not available on file appears to be inadvertently mentioned as the assessee e-filed the same on 28/10/2018 (acknowledgement enclosed as Anenxure-1) and same is available on the Income Tax Portal. 18. That a perusal of above facts would show that the assessment order dated 21/04/2021 made u/s 143(3) is neither erroneous nor prejudicial to the interest of revenue as enquiry has been made by the Assessing Officer on the issues raised in the impugned notice, issue u/s 263, and all such enquiries were responded to by the assessee. Even on facts no prejudice has been caused to the revenue and the order is not erroneous. The Assessing Officer has passe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of CIT v. Max India Ltd. [2007] 295 {TR 282; Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); CIT v. Embassy Brindavan Developers (2023) 153 taxmann.com 461 (SC). That if no enquiry was made by the Assessing Officer, the Commissioner would have jurisdiction u/s 263 but if enquiry was made by the Assessing Officer and the objection of the Commissioner is that such enquiry is not adequate the Commissioner would have no jurisdiction u/s 263, as held in the case of Hindustan Marketing and Advertising Co. Ltd. [2012] 341 ITR 180 (Delhi), CIT v. Leisure Wear Exports Ltd. [2012] 341 ITR 166 (Delhi). Where querry was raised during the course of scrutiny which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not, by itself, lead to the conclusion that the order of the Assessing Officer called for interference and revision as held in the case of CIT v. Vikas Polymers [2012] 341 ITR 537 [2010] 194 Taxman 57 (Delhi). Lack of any discussion in the assessment order cannot lead to the assumption that the Assessing Officer did not apply his mind as held in the case of CIT v. Vodafone ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome arising from roaming charges received from the appellant to tax causing no prejudice to the revenue, therefore initiation of proceedings u/s 263 was bad in law and void ab inito. Assessee also places reliance on the observations of Hon'ble ITAT, Mumbai Bench in the case of Naryan Tatu Rane (TS-290 ITAT 2016 (Mum) (2016) 70 taxmann.com 227 wherein it was observed that explanation to Section 263(3) cannot be said to have overridden the law interpreted by various High Courts (which held that before holding Assessing Officers order to be "erroneous" necessary enquiry and verification should be made). It further observed that if Revenue's action was approved, "then the Ld. Pr. CIT can find fault with each and every assessment order. He can also force the Assessing Officer to conduct the enquiries in the manner preferred by Ld. Pr. CIT, thus prejudicing the independent application of mind of the Assessing Officer." ft held that the explanation does not provide unfettered rights to Pr. CIT to revise each and every order. In view of above facts and legal propositions it is requested that proceedings initiated under impugned notice dated 08.12.2023 may kindly be dropped. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ld. Counsel for the assessee drew our attention to the contents of paper books [already mentioned in foregoing paragraph no. (B.3)]. In particular, he drew our attention to the written submissions filed from the assessee's side in the office of the Ld. PCIT, in the course of proceedings under section 263 of the Act (relevant portion of which have already been reproduced in foregoing paragraph no.B.2). He further contended that the impugned order under section 263 of the Act has been passed by the Ld. PCIT on the basis of audit objection, without applying her own mind. He also contended that the Ld. PCIT did not conduct independent inquiry herself, in the course of proceedings under section 263 of the Act. Furthermore, he contended that in view of the aforesaid submissions, the impugned order under section 263 of the Act should be quashed. The Ld. Departmental Representative relied on the impugned order dated 31.03.2024 passed by the Ld. PCIT. (C.1) We have heard both sides. We have perused the materials on record. On perusal of the impugned order under section 263 of the Act, it is found that the Ld. PCIT has acknowledged the receipt of the written submissions along with the ....