TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 88
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....e property advances made. Loss of (-) Rs. 1,62,67,340/- declared in the return for A.Y. 2020-21 e filed on 15.02.2021. After the case being processed u/s. 143(1) of the Act return selected for scrutiny and valid statutory notices u/s. 143(2) and 142(1) duly served upon the assessee. The information called for in the notice u/s. 142(1) were submitted. Ld. Assessing Officer (AO) concluded the proceedings accepting the loss declared by the assessee observing that "conclusively looking to the submissions uploaded along with corroborative evidences, the additions proposed earlier via show cause e-notice have now explained with proper justification. Accordingly, in the light of factual matrix no adverse inference may be drawn and thus the returned income of the assessee is accepted." 3. Thereafter, ld. PCIT called for the assessment records and after going through the same assumed jurisdiction u/s. 263 of the Act and issued assessee a show cause notice dated 07.03.2025. Referring to various issues which in the view of ld. PCIT have not been examined by the ld. AO resulting into the assessment order framed on 26.09.2022 being erroneous so far as prejudicial to the interest of Revenue. ....
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....y. The FAO has failed to verify the amount of gratuity actually paid by the assessee. The assessment order is silent on this point. In respect of disallowance of Rs. 15,87,717/- it is noted that these amounts were actually disallowed in the respective assessment years commencing from AY 2014-15. In support of the claim, the assessee had submitted copy of scheduled BP of the ITR for the respective assessment years wherein it is seen that the assessee has made disallowance of provision for gratuity. Further, the FAO has failed to examine the facts presented by the assessee as only part of the copy of the return of income was furnished by assessee and not the full ROI. Such cryptic submission by the assessee does not settle the ambiguities surrounding the issue. Therefore, the AO ought to have examined the issue in the backdrop of the relevant factual position, which has not been done. c) Disallowance of Rs. 2,55,864/- u/s 43B r.w.s. 36(1)(ii) being unpaid bonus:- In this regard, it is to mention here that as per proviso to section 43B of the Act, the said deduction is allowable when it is actually paid by the assessee on or before the due date applicable in....
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....non-deduction of TDS on account of failure on the part of builder to hand over the possession of the property to the buyers. The FAO has failed to establish the nature of the compensation paid to the customers. Also, the FAO has failed to examine the issue as to whether the assessee is deemed to be an assessee in default or not under the first provision to sec 201(1) r.w.r 31ACB of the IT Act/Rules. This issue was not examined by the FAO properly, thereby rendering the assessment erroneous and prejudicial to the interest of revenue. e) Addition of Rs. 64,93,534/- on account of debit/credit balances written off:- On this issue, the assessee has submitted that the recognition of the revenue was made on the basis of firstly, accrual basis and subsequently, it was reversed when actual invoice was raised by MSEDCL. In the assessment order, the FAO has only reproduced the submission of the assessee but not given any findings as to why the contention of the assessee was accepted. No verification was made by the FAO in this regard thereby rendering the assessment order erroneous and prejudicial to the interest of revenue. f) Addition of Rs. 82,64,73,532/- on acco....
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....nation 2 to Sec. 263 is reproduced below :- "Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer for the Transfer Pricing Officer, as the case may be.] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 7.4 From the above cited Explanation which has come into effect from 01.06.2015, it is clear that an assessment order which has been passed without making inquiries or verification which should have been made, would be rendered both erroneous and prejudicial to the interest of revenue. In the present case, the evidence on record cle....
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..... It simply gives decision on the basis of the pleading and evidence which comes before it. The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." The Hon'ble Calcutta High Court in the case of PCIT Vs. Hill Queen Investment (P.) Ltd., [2023] 152 taxmann.com 335 (Calcutta), has held that when and where the assessments orders which are subject matter of section 263 action shows that an enquiry has n....
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....oneous and prejudicial to the interest of the revenue. 2. The learned PCIT-3, Pune erred in law and on facts in not appreciating that for all the issues raised in 263 proceedings, * details were asked for by learned AO, * details were submitted by appellant, * details were duly verified nu learned AO * and thus, mind was applied by the learned AO during the scrutiny proceedings u/s 143(3) of the ITA, 1961. Appellant thus contends that, order of learned AO is not "erroneous" and "prejudicial to interest of revenue" considering conspicuous mind application by learned AO. 3. Learned PCIT-3, Pune also erred in law and on facts in not considering the submissions of the Appellant regarding various issues raised in the 263 notice. Appellant contends that, before reaching to any conclusion, learned PCIT-3, Pune could have verified "merits" of the submission himself. Contentions on Merits 4. Learned PCIT-3, Pune erred in law and on facts in setting aside the issue of alleged disallowance of Rs. 1,68,194/- (though worked out by the appellant u/s 14A r.w.r. 8D) disregarding repeated submission of Appellant that, ....
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....f past three years in Appellant's own case, in which, very same issue was decided. 11. The appellant craves leave to add/modify/ amend /delete all / any of the grounds of appeal." 5. Ld. Counsel for the assessee reiterated the submissions filed before ld.CIT(A) and also furnished a chart mentioning the replies on all the issues. However, ld. Counsel for the assessee fairly did not press Ground No.4 relating to alleged disallowance of Rs. 1,68,194/- u/s. 14A r.w. Rule 8D. For the other issues, he submitted that for some issues details have been furnished and some issues are debatable in nature and ld. AO has taken one of the permissible view. For some issues details have been furnished to the satisfaction of ld. AO and detailed enquiry has been undertaken. Reference made to the paper book running into 115 pages containing the basic documents, submissions filed before ld. AO along with copies of notices u/s. 142(1), replies filed in response to notice for revisionary proceedings u/s. 263 of the Act. Reliance placed on the decision of Hon'ble High Court of Kolkata in the case of PCIT vs. M/s. West Bengal Housing Infrastructure Development Corporation Limited - ITA no.8....
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.... any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and a....
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.... facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO 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 - RampyariDevi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt....
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....ng to provision for Gratuity Fund u/s. 40A(7) of the Act in the current year the provision is made at Rs. 4,30,432/- which has already been added to the income in the computation of income and the assessee has only claimed the actual payment of Gratuity at Rs. 1,06,752/-. Ld. AO has examined the issue in details and therefore issue need not be set-aside to the file of ld. Assessing Officer. Finding of ld.PCIT on this issue stands reversed. 15. As regards the disallowance u/s. 43B of the Act for the unpaid bonus referred in the impugned order, we note that the unpaid bonus was paid by the sister concern of the assessee Sharada Construction and Investment Company prior to the extended due fate of filing of the return of income u/s. 139(1) of the Act. Thus, no addition u/s. 43B is called for. Therefore, the issue need not be set aside to the file of ld. Assessing Officer. Finding of ld.PCIT on this issue stands reversed. 16. Disallowance u/s. 40(a)(ia) of the Act for non deduction of tax on interest paid to PNB Housing Finance Limited. We find the assessee has not deducted the tax at source on the interest paid at Rs. 56,71,523/-. We find that PNB Housing Finance Limited falls w....
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.... credit to income and net sale of electricity is booked when the credit note is received and invoice is raised. It was also submitted that since the income has already been recognized on the basis of accrual, it will tantamount to double taxation if the income is again recognized on the basis of generation of invoice. Ld. AO has accepted this contention and therefore since detailed enquiry has been conducted, ld. PCIT erred in restoring this issue to the file of ld. AO in the set aside proceedings. Finding of ld.PCIT on this issue stands reversed. 19. Next issue is the disallowance of interest at Rs. 11,60,000/-. We note that the assessee has given advance of Rs. 1.45 crore to Prashasti Properties Pvt. Ltd. for purchase of property. However, interest @4% has been charged as against the prevailing market rate of 12%. We note that this issue has been examined by the ld. AO and he has found that the transaction of giving advance to Prashasti Properties Pvt. Ltd, is in due course of business and further the assessee had sufficient interest free funds which are higher than the interest free/low interest bearing advances. Thus ld. AO accepted the contention of the assessee which is on....