TaxTMI 
TaxTMI 
2025 (12) TMI 1753
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.... 2. That on the facts and in the circumstances of the case and in law, the Ld. Principal Commissioner of Income Tax [PCIT], Delhi-4 has erred in Law & facts that on the basis of the issue raised in SCN as well as the order passed u/s. 263 of the I.T. Act, 1961, could not be established that the Assessment order is erroneous & prejudice to the Revenue. Kindly quash the Revision order u/s. 263 of the I.T. Act, 1961. 3. That on the facts and in the circumstances of the case and in law, the Ld. Principal Commissioner of Income Tax [PCIT], Delhi-4 has set aside the assessment order & direct to pass the fresh assessment de-novo, which is beyond the scope of PCIT u/s. 263 of the I.T. Act, 1961. Kindly quash the Revision order u/s. 263 of the I.T. Act 1961. 4. That on the facts and in the circumstances of the case and in law, the Ld. Principal Commissioner of Income Tax [PCIT), Delhi-4 has erred in Law & Facts in giving the finding which was not based on record as on date of assessment, which is irrelevant to decide the Revision order. Kindly quash the Revision order u/s. 263 of the I.T. Act 1961. 5. That on the facts and in the circumstances of the case and ....
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....mployees contribution towards PF and ESI; and (iv) The substantial increase in the other expenses claimed in the P&L account which remained unexamined. 5. In reply, assessee filed submissions along with documentary evidences from time to time before the Ld. PCIT and finally the revision order was passed on 19.03.2025 wherein the Ld. PCIT has not only hold the assessment order as erroneous and prejudicial to the interest of the Revenue on the issues which have been raised in the show cause notice but new / fresh issues were raised in the revision order passed while holding the assessment order as erroneous and prejudicial to the Revenue. Against such order, the assessee is in appeal before the Tribunal. 6. Before us, at the outset, the Ld. AR of the assessee submits that the Ld. PCIT has invoked the provisions of section 263 of the Act vide show cause notice dated 23.11.2023 wherein he proposed to revise the assessment on four issues. Ld. AR submits that thereafter notices were issued on 18.07.2024, 21.01.2025 and 17.02.2025 and finally notice was issued for hearing u/s 263 on 03.03.2025. All these notices are available at paper book filed by the assessee. As per ld. ....
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....ormation wOUS supplied by the assessee to the Assessing Officer, yet the 40 accepted the same without going into any verification/quiry his can be appreciated from the fact that the denils of the same working working, as per AS 7/ICDS III were called for during the revisionary proceedings u/a, 2ed of the Act." order dated 19.03.2025, as follows (ii) That second allegation on compliance of ICDN about the mismatch in revenue recognition & cost incurred in last part of Para No. 7.3 of Page No. 14 of 27 of Revision order dated 19.03.2025, as follows: detailed working of AS-7 and this needs a detailed verification/inquiry by the Assessing Officer and since the Assessing Officer has not enquired the same, I consider the assessment order framed by the AO is erroneous and prejudicial to the interest of revenue." (iii) That final conclusion on Non-compliance of ICDS in last part of Para No. 7.5 of Page No. 15 of 27 of Revision order dated 19.03.2025, as follows: "Perusal of these clearly demonstrate that there had been no application of mind/enquiry/verification by the Ld. Assessing Officer during the assessment proceedings and therefore on the issue of ICDS compl....
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....& wrong comparison given by the Ld. PCIT in Row No. 13 of Page No. 14 of 27 of Revision order is as follows: - " .........the revenue recognition is only Rs. 582 crores compared to the cost incurred of Rs. 2,467 crores" 2. Allegation on issue of refund :- That in 10th line of Para No. 7.5 of Page No. 15 of 27 of Revision order dated 19.03.2025, as follows :- " ...........Perusal of the assessment record reveals that this issue needed in depth investigation as why the refund of 3.48 crores and 11.11 crores on account of TCS were claimed by the assessee." Our Submission on allegation No. 2 A. Queries made by Ld. A.O. during assessment proceedings :- (1) Query No. 3 on refund claimed vide Notice u/s. 142(1), dated 08.12.2021 [P.B. Page No. 991. (ii) Query No. 3 on refund claimed vide Notice u/s. 142(1), dated 28.12.2021 [P.B. Page No. 103]. (iii) Covered in Show Cause Notice issued by Ld. A.O. dated 15.09.2022 [P.B. Page No. 216]. B. Reply submitted by assessee-company :- (i) Reply dated 02.02.2022 having reply of query on refund claimed by appellant- company [P.B. Page No. 126 & 129). ....
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....Ld. PCIT, Delhi-4 on difference in opening stock and closing stock :- (i) Reply dated 02.09.2024 having reply and detailed working of reconciliation of closing stock and opening stock [P.B. Page No. 366]. (ii) Reply dated 20.02.2025 having reply and detailed working on clarification on opening stock and goods in transit [P.B. Page No. 394 & 396]. (iii) That the Ld. A.O. verified all the documentary evidences in respect of difference in opening stock and closing stock including Raw Material & finished goods. (iv) Moreover, the Ld. A.O. had thoroughly examined the audited financials that includes revenue from operation, other income, purchases, expenditure on material & project development cost etc. 4. Allegation of Purchase from Non-filers of ITR- That in Point No. 9.3 of Page No. 23 of 27 of Revision order dated 19.03.2025, as follows: - "From the perusal of the preceding finding by the Survey Team, it is quite evident that the issue of bogus parties who have provided increase to the assessee company have come to light and this is exactly what could have been done had the Ld. AO carried out the required investigation in....
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....der dated 19.03.2025, as follows: - "Further, Perusal of the assessment records, reveal that the assessee had furnished a list of 592 Sundry Creditors for expenses appearing for last three financial years and the total amount of the same were Rs. 4,07,25,856/-, during the financial year 2017-18 Rs. 7,99,64,130/- for the financial year 2018-19 and Rs. 8,60,11,564/- for the financial year 2019-20. No enquiry/verification in respect of these sundry creditors have been carried out by the Assessing Officer during the assessment proceedings." (ii) That in first 2 lines of Page No. 22 of 27 of Revision order dated 19.03.2025, as follows: - "No enquiry/investigation were carried out by the Ld. AO despite the fact that these creditors were outstanding for more than three year." A. Queries made by Ld. A.O. during assessment proceedings :- (i) Query No. 8(b)(i) on current liabilities vide Notice u/s. 142(1), dated 08.12.2021 (P.B. Page No. 101). B. Reply submitted by assessee-company :- (i) Reply submitted along with complete list of creditors for capital expenditure and creditors for expenses by appellant-company on 03.02.2022 [P....
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....e enquiry is nothing but mere change of opinion on the part of the PCIT. Once the AO has made the queries and necessary replies were furnished, it cannot be said that the AO has not applied his mind to reach the conclusion and, therefore, the Ld. AR requested that the order passed u/s 263 of the Act be quashed. He prayed accordingly. 10. On the other hand, the Ld. CIT-DR submits that assessment was taken for complete scrutiny as stated in the assessment order which is placed at pages 243 to 248 and the AO has simply pasted the submissions made by the assessee and passed the order wherein the return filed income declared by the assessee was accepted. As per ld. CIT DR, it is clearly appears that there was no independent application of mind on the part of the AO and no verification whatsoever was done by him before passing the order. For this he placed reliance on the order of the Hon'ble Karnataka High Court in the case of Herbalife International India Pvt. Ltd. vs. CIT reported in 174 taxman.com 1008. 11. The Ld. PCIT further submits that the role of the PCIT is limited to examine whether the assessment order is erroneous and prejudicial to the interest of Revenue. Since ....
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....d asking the assessee to give explanation with respect to the other four issues for which the assessment order was held as erroneous and prejudicial to the interest of Revenue. Ld. PCIT cannot exceed his jurisdiction without issue of show cause notice on such issue. The Co-ordinate Bench of Tribunal in the case of Shail Gas Pvt. Ltd. vs. Pr. CIT in ITA No.630/Del/2021 vide order dated 05.08.2024 held that revision order passed by the PCIT u/s 263 beyond reasons in the show cause notice issues is without jurisdiction and allowed the appeal of the assessee. The relevant observations of the Co-ordinate Bench in para 7 to 18 of the order are as under: "7. We find that the case of the assessee was selected for limited scrutiny u/s 143(2) of the Income Tax Act, 1961 for A.Y. 2015-16. The assessment proceedings for A.Y. 2015-16 were initiated vide notice dated 27.07.2016 as is also mentioned in the Assessment Order and reproduced in the impugned order u/s 263. 8. The points taken up for limited scrutiny are, 1) low income in comparison to high loan advances, investment in shares, 2) low income in comparison very high investment & 3) large increase in investment in unlist....
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.... issue of valuation of shares with applicability of provisions of section 56(2) (viib) as raised in SCN u/s 263 being beyond the scope of "limited scrutiny" is also beyond the scope of section 263. 15. Reliance is placed on the following Judicial Pronouncements: i) PCIT vs. Shark Mines and Minerals (P.) Ltd. [2023] 151 taxmann.com 71 (Orissa) "9. Indeed, the Court finds that the Madras High Court has while affirming the decision of ITAT in Smt. Padmavathi (supra) taken the view that while exercising suo motu revisional power under section 263 of the Act, the CIT cannot travel beyond the scope of the issues which form part of the 'limited scrutiny' in the original Assessment Order. This Court concurs with the above view. 10. What persuades this Court to reach this conclusion is the requirement in law that if the AO has to go beyond the scope of the issues for which 'limited scrutiny' has to be undertaken by him, he has to seek prior permission of the superior officer in terms of the CBDT Instruction No. 7/14 dated 26th September, 2014 and Instruction No. 20/15 dated 19th December, 2015. Consequently, it was not open to the Pr. CIT ....
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....fied in not appreciating the facts that one of the reasons for selection of the case for limited scrutiny was to verify the introduction of capital in NBFC/Investment Companies which is connected with the issue of disallowance under section 14A of the Income-tax Act, 1961?" 6. A bare reading of the above instruction clearly shows that the PCIT cannot make a roving enquiry in the guise of a limited scrutiny and as such the instruction issued by the CBDT is binding on the Department.' 16. Order u/s 263 based partially on the issue raised in the notice and also on entirely new issue without any SCN or without providing any opportunity is beyond the mandate of section 263. 17. Further, reliance is placed on the following case laws: (i) Krishak Bharati Cooperative Ltd. Vs. ACIT [2016] 67 taxmann.com 138 (Delhi) "14. Keeping in view of the facts and circumstances of the case and the precedents relied upon, the validity of the order passed u/s. 263 needs to be considered. As per the admitted position, show cause notice was issued only with regard to one issue whereas order u/s. 263 has been passed on certain other issues also as discussed above. Adm....
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....uld not be material change in the financials of the Balance Sheet after audit so that it may not lose the tenacity and relevance of 'balance sheet on the date of valuation '. 9. In light of the facts discussed above, we hold that the balance sheet on the basis of which FMV of shares allotted on 31.3.2016 was determined by the assessee falls within the meaning of 'Balance Sheet' as envisaged under Rule 11U. Hence, we find no error in the FMV of shares determined by the assessee on the basis of balance sheet drawn on 31.3.2016." 18. Hence, keeping in view the entire facts and circumstances of the case and the judicial pronouncements mentioned above, we hold that, the order of the ld. PCIT passed u/s 263 cannot be affirmed owing to the reasons of, i) the order is passed beyond jurisdiction, ii) the order passed is beyond the limited scrutiny, iii) the order has been passed on the issues for which no show cause notice has been issued, iv) the issues flagged by the ld. PCIT have examined by the AO, v) the decision of the ld. PCIT determining the difference on the value of the shares at Rs. 1.50 per share is against the provisions of the Act as the asses....
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....an three years. 16.2 On careful consideration of the details filed by assessee, we find that the allegation of ld. PCIT that there were certain creditors which are outstanding for exceeding period more than three years is incorrect and further it is not established by the PCIT that, even if any creditor was outstanding for a period of more than three years, how the same has could be held as an error which is prejudicial to the interest of Revenue. There might be some error however, it is not necessary that every error resulted into loss of revenue and thus the assessment order cannot be held as prejudicial to the interest of revenue and the twin conditions enumerated in section 263 are not satisfied simultaneously. The Ld. PCIT has tabulated certain parties at pages 19 to 26 of its order and observed that no enquiry was made with respect to these creditors. Further, the Ld. PCIT has refers certain enquiries made during the course of post survey proceedings, it is important to note that the survey was carried on 12.08.2024 at the business premises of the assessee and the order under reference was passed u/s 143(3) on 27.09.2022, thus, there is no question of taking any reference ....
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....lowed by the assessee which was not replied and the AO had accepted the income declared by the assessee and further alleged that there was mismatch in Revenue recognition and costs incurred in compliance of ICDS/AS-7 and the AO has not made any enquiry. In this regard it is seen that the AO has made enquiries with respect to the ICDS in terms of the query letter issue u/s 142(1) on 08.12.2021 vide para 7.1 where assessee was specifically asked to file the supporting documents for compliance of ICDS/AS-7 and furnished the reasons for non- complying the provisions of section 145(2) keeping in mind substantial amount of turnover and closing stock. Thereafter vide notice u/s 142(1) dated 28.12.2021 again the same query was made. The assessee vide its letter dated 02.02.2022, filed its reply and further vide reply dated 2.8.22 available in PB page 196 onwards, necessary explanation was given with respect to the compliance of ICDS and relevant evidences were also filed along with reply submitted. Further before the Ld. PCIT, assessee has made specific replies with respect to the working of ICDS which are at pages 367 to 369 as reply dated 02.09.2024 and further reply was made vide letter....
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....ck in current year. Thus, the order cannot be hold as erroneous and prejudicial to the interest of the Revenue on this issue. 17.6. With respect to the last allegation of purchases from non-filers of ITR, we find that the PCIT has based his finding from the enquiries conducted during the course of survey carried out at the business premises of assessee on 12.08.2024. Since, the survey was carried out after passing the assessment order under revision and there was no material available on record or any information was available with the AO to doubt the purchases made from the parties which are non-filer of the ITR. Further, the Ld. AR also drew our attention to the fact that the Revenue has taken action u/s 148 for reopening of the assessment based on such enquiries/investigation/purchases separately, therefore, this cannot be an issue born out from the assessment records for which it could be held that the assessment order is erroneous and prejudicial to the interest of Revenue. 18. In view of the above facts, we find that all the issues which are forming part of the show cause notice issued for invoking the provisions of section 263 as well as the other issues which were not....
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....unt was not made is ex-facie incorrect. This being the position, this is not a case of failure to investigate, but as no addition was made, the Revenue can argue that it is a case of wrong conclusion and decision in the re-assessment proceedings. Therefore, to exercise jurisdiction under Section 263 of the 1961 Act, the Commissioner of Income Tax should have examined the merits and only on reaching a finding that the re-assessment order was erroneous and prejudicial to the interest of the Revenue made an addition. This is not a case of 'no inquiry and verification', but as made out by the Revenue, a case of wrong conclusion. The difference between the two situations is clear and has different consequences. This being the position, the High Court was right in dismissing the appeal preferred by the Revenue. The special leave petition is dismissed in the above terms. Pending application(s), if any, shall stand disposed of." 21. The Hon'ble Delhi High Court in the case of PCIT vs. Clix Finance India Ltd. while concurring to the findings of the Tribunal has observed as under: "27. Considering the aforesaid judicial pronouncemen....
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....ointing 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 of this Court. 30. So far as the reliance placed by the CIT on Umashankar Rice Mill is concerned, the same is misplaced, particularly in light of the insertion of Explanation 2 to Section 263 of the Act, brought in place by the Finance Act, 2015. The said amendment markedly specifies various conditions to exercise the authority vested in the Commissioner under Section 263 of the Act, leaving no ambiguity in the interpretation of the said provision. 31. In view of the aforesaid, the appeal preferred by the Revenue is dismissed alongwith the pending application(s), ....