TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 704
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....its return of income on 30.10.2019 declaring total income of Rs. 8,54,65,340/-. The case was selected for compulsory scrutiny and a notice u/s 143(2) of the Act was issued and served on the assessee. Subsequently, notice u/s 142(1) of the Act along with a questionnaire was issued on 03.11.2020 and 11.12.2020. The assessee responded to the above statutory notices by furnishing the details through e-proceedings portal which were verified by the Assessing Officer. After verifying the details, the Assessing Officer completed the assessment u/s 143(3) on 21.04.2021 determining the total income at Rs. 11,53,82,340/- wherein he made addition of Rs. 74,17,000/- on account of difference in the valuation report of the DVO and the value declared by the assessee in respect of value of various shops of "Ganga Platino". Similarly, he also made addition of Rs. 2,25,00,000/- on account of provision for warranty. 4. Subsequently, the Ld. PCIT examined the record and noted that the order passed by the Assessing Officer u/s 143(3) of the Act in the case of the assessee for assessment year 2019-20 prima facie appears to be erroneous and prejudicial to the interest of the Revenue. He, therefore, issue....
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....,19,308/- to 'Provision for Construction Expenditure' and Rs. 2,44,07,369/- written back as 'Provision of Expenses Written Back' have been booked by the assessee by a journal entry dated 31/03/2020 wherein complete details of the expenses debited to the respective ledgers are not available on record thereby making it difficult to ascertain the genuineness & authenticity of the same. The fact that the assessee firm had incurred such huge expenses amounting to Rs. 7,43,19,308/- after the completion of the work related to buildings P,Q & R of the project 'Ganga Platino' is also not palatable. The AO should have disallowed the 'provision for construction expenses to be incurred in future' debited to the P&L account. The AO failed to disallow the same during the assessment proceedings for the year under consideration. 04. In view of the above, it is found that the no verification on the aforesaid issues has been done in the assessment proceedings by the AO. As per explanation (2) to section 263(1) of the Act an order without making inquiries or verification which should have been made is deemed to be erroneous in so far as it is prejudicial to the inte....
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....een that the Project 'Ganga Platino' was already completed on 19.04.2018, and the total expenses booked after completion of the project under the head of 7,43,19,308/- after the completion of the work related to buildings P,Q & R of the project 'Ganga Platino'. The assessee had not submitted the details of the expenses incurred after the completion of the said projects and as to how the same were allowable. The Assessing Officer has not carried out proper examination / verification /enquiries in the course of assessment proceedings with respect to the above mentioned issue and as such there was lack of examination/verification/enquiries on the part of Assessing Officer. 6. In view of the above facts, it is clear that the above issue has not been properly examined/verified/enquired upon by the Assessing Officer during the course of the assessment proceedings. It has been held by various Courts that lack of enquiry on the germane issue renders the assessment order being erroneous and prejudicial to the interest of revenue. In this connection the following judicial pronouncements are relied upon: * The Hon. Supreme Court in Rampyari Devi Saraogi v CIT 67 ITR 84 whi....
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....t the order of the AO was cryptic, and was not passed after due examination and verification of certain issues and therefore, there was an error on the part of AO which led to a correct conclusion of the CIT that the order of the AO was not only erroneous but also prejudicial to the interest of Revenue. * In the case of Pooja Gupta in ITA No 4057/Del/2018 dated 31.01.2019, the ITAT Delhi has discussed the validity of action under section 263 in respect of penny stock matters. The Tribunal has referred to the detailed SOP issued by the CBDT, CBDT Instruction dated 16.03.2016 on penny stock/LTCG, and other specified parameters in this order, and held that the order u/s 263 was justified since there was complete lack of inquiry with regard to the perspective for which the case was selected for scrutiny, and that the AO had merely relied on the assessee's submissions. * The decision of the ITAT Delhi Bench in the case of Bhushan Steel Ltd., New Delhi vs ACIT dated 30 March, 2015 is relevant to note as it relates to the aspect of lack of inquiry at the end of the AO for valid initiation of proceedings under Section 263 of the Act. * Hon'ble High Court OF Karnataka in the c....
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....ssessee or any other person. 8. In view of the above facts and circumstances of the case and keeping in view the judicial pronouncements as discussed above, it is held that the assessment order dated 21.04.2021 for A.Y. 2019-20 has been passed by the AO without making necessary examination/verification/enquiries on the issue mentioned above and accordingly, the same is held to be erroneous in so far as it is prejudicial to the interest of Revenue: 9. Accordingly, the said assessment order dated 21.04.2021 is hereby set aside to the file of the Assessing Officer for examining the above issues in detail while framing the fresh assessment order. The Assessing Officer shall make necessary examination, verification and enquiries in respect of the above issue after giving adequate and reasonable opportunity of being heard to the assessee." 6. Aggrieved with such order of the PCIT, the assessee is in appeal before the Tribunal. 7. The Ld. Counsel for the assessee referring to pages 38 to 52 of the paper book drew the attention of the Bench to question No.11 in the notice issued u/s 142(1) of the Act which reads as under: "11. During the course of search at the office premises o....
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....Ld. Counsel for the assessee drew the attention of the Bench to the reply given by the assessee on 10.04.2021 regarding the same. The Ld. Counsel for the assessee submitted that the Assessing Officer had specifically asked the questions regarding the allowability of provision of expenditure. Referring to the following decisions, he submitted that since the Assessing Officer had made specific enquiries during the course of assessment proceedings with regard to the allowability of provision of expenditure and the assessee had given the detailed reply and it is not a case of lack of enquiry, therefore, the Ld. PCIT was not justified in invoking the provisions of section 263 of the Act: 1. THE PCIT VS PRAKHAR DEVELOPERS PRIVATE LIMITED, ITA 182 OF 2023 (MADHYA PRADESH HC) 2. M/S. B.U BHANDARI SCHEMES VS. THE PCIT, ITA NOS.637 ΤΟ 641/PUN/2018 (ITAT PUNE) 3. SHRI RAMAMOORTHY VASUDEVAN VS. THE PCIT, ITA NOS 968/PUN/2016 (ITAT PUNE) 4. MEHTAB ALAM SULTAN VILLA, JAJMAU VS, ACIT, KANPUR, ITA NOS 294/LKW/2014 (ITAT LUCKNOW) 5. CIT VS SUNBEAM AUTO LTD, ITA NO. 1399 OF 2006 (DELHI HC) 6. BISMILLAH TRADING CO. VS. INTELLLIGENCE OFFICER, SQUAD NO. II, [2001] 248 ITR 292 (K....
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....bsp; PAN: AAJFG0543R AY 2019-20 Dated 02/02/2021 DIN & Notice No ITBA/AST/F/142(1)/2020-21/1030292594(1) Notice under sub-section (1) of Section 142 of the Income Tax Act, 1961 Sir/Madam/M/s, In connection with the assessment for the assessment year 2019-20 you are required to a) Furnish or cause to be furnished on or before 09/02/2021 at 11:00 AM the accounts and documents specified overleaf, b) Furnish and verified in the prescribed manner under Rule 14 of 1.T. Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 09/02/2021 at 11:00 AM. c) The above mentioned evidence/information is to be furnished online electronically in 'E-Proceeding facility through your account in 'e-filing' website of Income Tax Department d) Para(s) (a) to (c) are applicable if you have an account in e-filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section....
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....2016 provides the remedy to the allottees in case of any structural defects incurred in the five years from the date of giving the possession then the promoter is liable to rectify the defect at his own cost. Hence the assessee made provision for Defect warranty in accordance with aforesaid mentioned discussion. A copy of engineer's certificate is also attached for your honour's reference. (Refer annexure "H1") The assessee hereby produces section 14(3) of The Real Estate (Regulation And Development) Act, 2016 for your honour's reference. "143(3) In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter's failure to rectify such defects within such time the aggrieved allottees shall be entitled to receive appropriate compensation in the manner as provided under ....
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....n tune of Rs. 7,43,19,308/- in AY 2020-21 while provision of Rs. 2,44,07,368/- is added back in AY 2020-21. In view of same, you are requested to state whether provision written back is added to income or not for AY 2020-21. Also, Furnish supporting evidences to prove your claim. Also, furnish ledger account extract of expenses of Rs. 7,43,19,308/- SWAPNIL SHARADRAO PATIL CENTRAL CIRCLE 2(3) PUNE" 14. We find the assessee vide reply dated 10.04.2021 had given the reply, copy of which is placed at pages 72 to 75 of the paper book. 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. 15. 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. 2.9....
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....t cannot be said that there was no enquiry by the Assessing Officer on this issue 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 Industri....
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.... is right in his submission that one has to keep in mind the distinction between "lack 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 Incometax 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....
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....must in other spheres of human activity. 12.4 The Mumbai ITAT in the case of Sh. Narayan Tatu 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 ....
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.... assessee: "Thus, the Tribunal has considered in detail the aspect of revisional power to be 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 Offi....
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....der holding that AO had made detailed enquiries while allowing assessee's claim for deduction of business 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 Comm....