TaxTMI 
TaxTMI 
2026 (1) TMI 1034
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....tified and against the provisions of section 263 may be annulled. 2. That Ld. PCIT (1) erred in law and on facts in setting aside the order of Assessing Officer (National Faceless Assessment Centre, Delhi) by applying the different approach on the same set of facts on the issues already considered by the Assessing Officer. 3. The order passed u/s 263 by PCIT(1), Ludhiana, may be cancelled and that of Assessing Officer be restored. 3. That Ld. PCIT erred in law and on facts in setting aside the order of Assessment with a view to fishing and roving enquiries without pointing out or determining any error which was prejudicial to the interest of revenue in the order of Assessing Officer. The order passed u/s 263 by PCIT-1, may be set aside. 4. That the appellant craves leaves to add, amend, alter, modify or substitute all or any of the above mentioned grounds of appeal before the appeal is finally heard and disposed off. 5. Hence this appeal. 3. Briefly, the facts of the case are that the assessee is a limited company engaged in the manufacturing of cycles. The return of income for AY 2021-22 was filed, and the assessment was com....
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....ion of notional interest along with source of investments made during the year. As regards notional interest on security deposits and margin money, the notional interest is not taxable and the income is booked as per IND- AS only. During the assessment proceedings we had filed detailed computation of income where this item has been specifically mentioned and explained. Page 23-35 As regards reconciliation of Form 26AS, we clarify that out total sales of the assessee company during the year were Rs. 709,05,88,098/- and out of sales of Rs. 77,93,38,769/- were made to State Government of Tamil Nadu, Karnataka and etc. who have deducted TDS on this sale. During the assessment proceeding while submitting reconciliation of 26AS we have given the heads of income where the income on which TDS has been deducted is included. Therefore there is no difference of any sale figure vis-à-vis 26AS or balance sheet of ITR. The Ld. AO has duly examined and accepted the reconciliation of items in form 26As with financial statements / ITR. 5. During the assessment proceedings, we were asked to provide the details of opening and closing stock along with basis of valuation which ....
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....pose on the issues as mentioned above in para 5. 4. The PCIT, vide the impugned order, held that the AO failed to make necessary inquiries and set aside the assessment order, directing a fresh assessment. 5. Feeling aggrieved by the order of the Ld. PCIT the assessee preferred in appeal before the Tribunal for the grounds mentioned hereinabove. 5.1 The ld. AR hadsubmitted that in the present case, the ld. AO has passed a detailed elaborate order after complying the requisite formalities and issuing the notice, questionnaire to the assessee and thereby made the addition in the hands of the assessee to the tune of Rs. 1,18,812/-. It was submitted that the issue which was flagged by the ld. PCIT in 263 proceedings were already examined by the Assessing Officer. 6. Now, the assessee is in appeal before us on the ground mentioned herein above. 7. During the course of hearing the Ld. Counsel for the assessee, Sh. Ashish Aggarwal, submitted that the original assessment was framed after detailed scrutiny. Specific questionnaires were issued regarding TDS, expenses, and stock details, to which the assessee had replied vide letter dated 17.11.2022. The ld. AR had drawn our att....
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....e on account of receivable from District Magistrate Malda (West Bengal) against sales made (Paper Book page reference no. 3 and 6 to 26). Also during the original assessment proceedings the Ld. AO had raised a specific query no. 14 (Paper Book page reference no. 43 and 44) asking for details of sundry debtors and creditors in a specific format which was duly replied vide reply dated 17.11.2022 at point no. 14 (Paper Book page reference no. 47). It is surprising as to how a debit amount shown under the head debtors receivable can be treated as income. The appellant filed the copy of account of the debtor District Magistrate Malda (West Bengal) showing balance of Rs. 41,63,805/- before the Ld. Pr. CIT. The Ld. Pr. CIT did not make any enquiry and has failed to establish that the assessment order is erroneous and prejudicial to the interest of revenue. c) The Ld. Pr. CIT in para 5.3 of his order has stated: "Regarding "Notional interest of Rs. 1,84,15,696/-", the assessee has submitted that the said amount has been shown as income in the P&L account as per the provisions of IND-AS as per mandatory accounting principles. Further, assessee has submitted that t....
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....Magistrate, Malda, and not a credit balance (Payable). Therefore, section 68 or cessation of liability u/s 41(1) could not apply. The PCIT invoked jurisdiction on a non-existent issue. Similarly, regarding Professional Fees, the difference alleged by the PCIT was merely a presentation issue. The assessee had deducted TDS on the full amount, and the reconciliation of expenses was available on record. Lastly, regarding Notional Interest: This income was recognized purely due to Ind-AS compliance and is not taxable under the Income Tax Act. The computation of income filed clearly showed this exclusion, which the AO accepted. 8. Per contra, the Ld. DR relied upon the order passed by the lower authorities and made issue-wise submissions. 9. We have heard the rival contention of the parties and perused the material available on the record. 9.1. We deal each issues raised by the ld. PCIT separately. 9.2 The first issue raised by the Ld. PCIT was with respect to the alleged difference of Rs. 2,84,19,238/- on account of expenditure of professional and technical fees. 9.3 In this regard the Ld. AR had drawn our attention to query no. 16 raised by the assessee vide letter dt. 1....
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....proceeding, the assessee has submitted that the amount of Rs. 41,63,805/- is amount receivable (not payable) from District Magistrate, Malda, West Bengal against sales made by the assessee in earlier years. And the amount is still recoverable and efforts are being made to realize the outstanding amount. However, on perusal of the assessment and reply filed by the assessee, it is found that the AO has not examined the list of sundry creditors provided by assessee during assessment proceedings. Thus, the AO failed to point out this discrepancy during assessment proceedings and failed to examine and verify this issue. 10.2 The Ld. AR in this regard submitted that the amount of Rs. 41,63,805/- is a debit balance on account of trade receivable from District Magistrate Malda, and therefore, there cannot be a loss to the Revenue. Further, the Assessing Officer in the letter dated 19/10/2022 at S.No. 14 (page 43,44) had raised the specific query in this regard. The same was duly replied by the assessee vide letter dt. 17/11/2022. 10.3 The Ld. DR relied upon the order passed by the lower authorities. 10.4 We have heard the rival contention of the parties and perused the ma....
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.... had no occasion to form an opinion on it. Since the assessment was subject to complete scrutiny, it was incumbent upon the AO to examine this issue. The failure of the AO to do so is deemed to be an error and renders the order prejudicial to the interests of the Revenue. The DR further argued that whether the issue is ultimately in favor of or against the assessee can only be determined after the AO has examined it. In the absence of any such examination, it cannot be said that the AO has applied their mind to the matter. 11.4 The Ld. DR relied upon the order passed by the lower authorities. It was submitted that non-examination of the issue by the Assessing Officer would render the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue. 11.5 We have heard the rival contentions of the parties and perused the material available on record. The issue at hand concerns the treatment of "notional interest" recognised in the Profit & Loss account by the assessee in compliance with the mandatory provisions of IND-AS. It is the assessee's submission that such notional interest is taxable only at the time of maturity, not in the year of accrual/....
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....ard the finding of the PCIT was recorded in para 5.4 as under: 5.4 Regarding reconciliation of Form 26AS, the assessee submitted that total sales of the assessee company during the year was Rs. 709,05,88,098/- and out of this, sales of Rs. 77,93,38,769/- was made to State Government of Tamil Nadu, Karnataka and etc., who have deducted TDS on this sale. However, from perusal of reconciliation statement of income as per financials and Form 26AS provided by assessee during assessment proceedings, it has been observed that total sales amounting to Rs. 77,93,38,769/- is made to State Government of Tamilnadu, on which certain tax was deducted. There is a difference in the sale figure in 26AS form and ITR which need to be verified. The AO should examine that the assessee booked his turnover with the TDS amount or without it. Thus, AO failed to examine and verify this issue also. 12.1 In this regard, the Ld. AR had drawn our attention to query no. 7 at page 42 of the paper book whereby the Assessing Officer has specifically asked the reconciliation of income. The assessee has duly replied to the same. The reply is available at page 47 & 53 of the paper book. The Ld. PCIT despit....
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.... verification which should have been made in this regard. 5.6 In view of the above, it is evident that the Assessing Officer has not examined vital facts highlighted above having significant bearing on taxability of income of the assessee. There is no question of Assessing Officer taking possible view. Thus, the order is passed without making enquiries or verification on the issues mentioned above which should have been made thereby is erroneous in view of the provisions of Explanation 2(a) to the section 263. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. The assessee has failed to explain the above mentioned issues. Thus, the order is prejudicial to the interests of revenue. Therefore, the twin conditions get satisfied and therefore, the assessment would fall in the category of erroneous and insofar as prejudicial to the interest of the revenue. 13.1 The Ld. AR has drawn our attention to page 47 at Sr.No. 17 whereby the Assessing Officer has called for the details of the stock. The assessee vide his rep....
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....to examine the qualitative and quantitative aspects of the stock has a tax implication. Therefore the order passed by the Assessing Officer is prejudicial and erroneous. 13.6 The ld. AR, in rebuttal to the closing stock has submitted that the assessee is following SAP method and all the documents were provided by the assessee to the AO and there was no failure on the part of the assessee. Further, the assessee relied upon decision of the Co-ordinate Bench in the case of GAIL India Ltd. Our attention was drawn to paragraph 5.3 wherein the stock valuation was considered by the PCIT to the following effect. It was submitted that once the AO has formed an opinion, there is no reason to substitute the AO's opinion for the PCIT's. 13.7 We have heard the rival contentions of the parties and perused the material available on record. About the issue of stock valuation, the assessee submits that the details of opening stock and closing stock were provided at page 55 of the Paper Book in response to the specific query raised by the Assessing Officer (AO). However, the AO failed to appreciate that the case was selected specifically to verify stock valuation. While the assessee pr....