TaxTMI 
TaxTMI 
2025 (6) TMI 651
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.... that same has been already offered for taxation on accrual basis. 4. The learned Commissioner of Income Tax erred in setting aside the AO order on account of Rs. 1,39,57,619.00 u/s 14A despite of the fact that assessee has suo motu disallowed expense u/s 14A & same has been verified & accepted by the assessing officer. 5. The appellant craves leave to add, amend, delete or alter any of the grounds of appeal. 3. The relevant facts giving rise to this appeal are that the assessee, a trader of mobile phones, LED TV, air conditioners, washing machines, etc., filed its Income Tax Return (ITR) on 30.11.2018 declaring loss of Rs. 1,58,55,19,587/-. The case was scrutinized and the consequential assessment order accepting the returned income was passed on 30.09.2021. Later, the Principal Commissioner of Income Tax (PCIT), vide impugned order under section 263 of the Income Tax Act, 1961 (Act) has held that the AO has not only failed to tax interest income of Rs. 16,18,16,439/- on FDRs as evident from 26AS of the assessee but also failed to disallow expenditure of Rs. 1,39,57,619/- under section 14A of the Act. Consequentially, the PCIT concluded that the assessment order was not only ....
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....accepted after in-depth investigation by the AO. The Ld. AR specifically submitted that one of the reasons for selection of the case of AY 2016-17 for scrutiny was the disallowance under section 14A of the Act and the assessments of AYs 2016-17 and 2017-18 were never revised under section 263 of the Act. Thus, it was contended that the present case had germinated only due to change of opinion and nothing else. The issue of interest on FDRs dealt by the Ld. PCIT, in view of the AO's order dated 20.03.2025, was contended to be a case of non-application of mind by the Ld. PCIT. 5.1 The Ld. AR further drew our attention on the following finding of the Ld. PCIT on the issue of disallowance under section 14A of the Act [page 21 of the impugned order] to submit that the Ld. PCIT had failed to demonstrate and establish that how the assessment order, on the issue of disallowance under section 14A of the Act, was prejudicial to the interest of revenue: ".....Perusal of the assessment order reveals that the AO has not computed deduction in respect of expenditure incurred by the assessee in relation to which such income which does not form part of the total income under this Act. Secondly, ....
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....ed that the case of the assessee was squarely covered by the decision of the Hon'ble Delhi High Court in the case of Clix Finance India Pvt. (supra). 5.3 The Ld. AR drew our attention to the fact that the assessee had earned only dividend income on investments made in mutual funds. Our attention was drawn to the fact that the assessee, on itself, had disallowed 25% of salary paid to Mrs. Aparna and Mr. Rahul Mathur, who was, besides other works also looked after the investment in mutual funds. The investment in mutual funds had been made out of surpluses only and it did not require any specific expenditure after making investments. 6. The Ld. CIT-DR defended the order of the PCIT and argued the case vehemently. 7. We have heard both the parties and have perused the material available on record. 8. As far as the first issue; i.e. the taxability of interest income of Rs. 16,18,16,439/- on FDRs is concerned, we find merit in the arguments/submissions/contentions of the Ld. AR that the AO is justified in holding that interest income on FDRs has been rightly taxed in the original assessment and no interest income on FDRs remined left out of the taxable income. In view of the above, ....
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.... case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12.2004 and 06.01.2005. Thus, it is not a case where no enquiry whatsoever has been conducted by the AO with respect to the claims under consideration. However, this leads us to an ancillary question- whether the mandate of law for invoking the powers under Section 263 of the Act includes the cases where either an adequate enquiry has not been made and the same has not been recorded in the order of assessment or the said authority is circumscribed to only consider the cases where no enquiry has been conducted at all. 22. Reliance can be placed on the decision of this Court in the case of CIT v. Sunbeam Auto Ltd. [2009 SCC OnLine Del 4237], wherein, it was held that if the AO has not provided detailed reasons with respect to each and every item of deduction etc. in the assessment order, that by itself would not reflect a non-application of mind by the AO. ....
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.... conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this court. That being the position, the present case would not be one of "lack of inquiry" and, even if the inquiry was termed inadequate, following the decision in Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) (page 180) : "that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter." No substantial question of law arises for our consideration." 24. In Ashish Rajpal as well, this Court was of the view that the fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to....
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....re two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. (See Rampyari Devi Saraogi v. CIT [(1968) 67 ITR 84 (SC)] and in Tara Devi Aggarwal v. CIT [(1973) 3 SCC 482 : 1973 SCC (Tax) 318 : (1973) 88 ITR 323].)" [Emphasis supplied] 26. Recently, the Hon'ble Supreme Court in the case of CIT v. Paville Projects (P) Ltd. [2023 SCC OnLine SC 371], while relying 17:06:54 upon Malabar Industrial Co. Ltd., has discussed the sanctity of two- fold conditions for the purpose of invoking jurisdiction under Section 263 of the Act. The relevant paragraph of the said decision reads as under: - "27. Learned counsel appearing on behalf of the assessee has heavily relied upon the decision of this Court in the case of ....
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.... setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond jurisdiction, bad in law and void- ab-initio." 29. It is discernible from the aforenoted findings of the ITAT that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudicial to the interests of the Revenue. Thus, the findings of fact arrived at by the ITAT do not warrant any interference....