TaxTMI 
TaxTMI 
2023 (11) TMI 1417
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....ing aside the order passed u/s 143(3) with a direction to the assessing officer to pass fresh assessment order after taking into consideration, the issues as may be considered together with the issues discussed in order. Accordingly, PCIT has erred in setting aside the assessment order making it wide open instead of restricting the issues raised in the show cause notice. 3. It is therefore prayed that above order passed by Pr. CIT u/s 263 may please be quashed or modified as your honors deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a Private Limited Company and had filed its return of income for assessment year (A.Y.) 2018-19, on 27.08.2018, declaring returned income Rs. 1,24,90,210/-. The assessee's case was selected for complete scrutiny to verify the issue of Transactions with Company whose Registration has been cancelled by MCA. The assessment order has been passed u/s 143(3) r.w.s. 143(3A) & 143(3b) of the Act, on 27.01.2021, accepting the returned in....
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....ion of income available in ITBA portal for AY 2018-19, it was noticed by ld. PCIT that the assessee has not disallowed the same. The assessing officer was required to make inquiry and disallow the same, which he has failed to do. 5. From the above facts, the ld. PCIT noticed that the Assessing Officer has finalized the Assessment Order without making inquiry and verification on the issue, which should have been made during the course of assessment proceedings. This shows lack of inquiry and verification and non-application of mind by the assessing officer and thereby rendering the assessment order u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act passed by the Assessing Officer on 27.01.2021, as erroneous in so far as it is prejudicial to the interest of Revenue within the meaning of Section 263 of the Income Tax Act and is required to be revised u/s 263 of the Act, 1961. Accordingly, ld. PCIT issued show cause notice bearing DIN No. ITBA/COM/F/17/2022- 23/1050992059(l) dated 20.03.2023 and was duly served upon the assessee, through e-proceedings and the assessee -company was provided an opportunity of being heard and to offer explanation, if any, as well as to adduce evidence, if ....
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....ue from its operation or yield no investment, as appearing in its books, has lent the money. "3.2 It is also noticed from the Form 3CB - Col. 20 (b) that the PF contribution received from employees of Rs. 14,796/- for which due date for payment has been mentioned as 15.06.2017 has been actually paid on 23.06.2017 i.e. after the due date. As per provisions of Sec 36(1)(va) the contribution paid after the due date is not eligible for deduction. 3. In regards to the above it is submitted that the first matter related to Unsecured Loan was already examined by the Ld Assessing Officer during the course of assessment proceedings. From the screenshot of scrutiny assessment order u/s 143(3) depicted in Point No 2 above, it is clearly visible that the issue of transactions with company whose registration has been cancelled by MCA was under due scrutiny while completing the assessment u/s 143(3). To substantiate the complete facts the exact notice wherein the details have been asked which is also the matter for the proceedings under consideration u/s 263 and the corresponding replies wherein all the details relating to the said issued have been submitted is listed as follow....
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....eeked further details about the transactions with company whose registration has been cancelled by MCA. The details seeked are listed below for your kind perusal. Question No.1 - Kindly furnish the nature of services rendered by the said party during the F.Y.2017-18. Question No. 2- Kindly furnish the date of strike off and reason on which Registration of the company has been cancelled by MCA with the documentary evidence. Question No. 3- Kindly furnish the confirmation of unsecured loans along with copy of ITR, ledger copy and details of interest received Please furnish the copy of bank statement with respect to confirmation of unsecured loans by highlighting the loan amount and details of interest paid during the year under consideration. Question No, 4- Kindly furnish reason why the company has given substantial loan when its Registration of the company has been cancelled by MCA. The assessee submitted its detailed reply along with all necessary documentary evidence vide response dated 16.01.2021 to the supra notice. 5. All the above notices and replies alongwith acknowledgement of reply and relevant attachments are attached herewith ....
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....venue. The fact that the Assessing Officer in the various notices and the assessment order has specifically adverted to this issue also concludes that no lack of enquiry on the issued in notice u/s 263 exists and neither any interest prejudicial to the revenue exists. Therefore, order passed by the assessing officer cannot he termed as erroneous. 9. Reliance is placed on the decision of Hon'ble Apex Court in Malabar Industries Ltd, vs. CIT [2000] 243 ITR 83 (SC), wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT, The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue, In the following circumstances, the order of the assessing officer can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the assessing ....
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....2. In regards to the above it is submitted that Clause (a) wherein the order is passed without making inquiries or verification is not applicable in the present case since alt the issued even mentioned in the notice under 263 have been duly dealt with in the assessment proceedings. Ail the proofs have been duly submitted as above and in the attachments. Similarly Clause (b) above, no relief has been provided without any inquiry, all the inquiries in regards to the expenditures have even been duly done in the course of assessment proceedings by the Assessing Officer. Clause (c) and Clause (d) are not applicable. Hence even the explanation 2 to 263 does not hold applicable in the present case under consideration. 13. Reliance is further placed on the judgement of Jurisdictional Hon'ble ITAT Surat Bench in the case of Rampratap S. Ghasoliya vs PCIT [ITA No.1266/Ahd/2017] dated 23.08.2021 wherein it was held that "Taking note of the aforesaid dictum of law laid down by the Hon'ble Apex Court, let us examine the assessee's facts. We note that in assessee s case, ld PCIT has raised three issues in his order under section 263 of the Act About these three issues, we have a....
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....r profit and loss account and confirmation of parties before Assessing Officer - It was again furnished in revision proceedings and that nothing was found wrong against those documents by Pr. Commissioner - During scrutiny assessment assessee filed reply to all querries raised by Assessing Officer and produced all relevant evidences and after considering those materials and explanation, Assessing Officer came to a conclusion regarding advances and commission payments in question though it was not mentioned explicitly in assessment order -Whether, on facts, impugned invocation of revision under section 263 was unjustified - Held, yes [Paras 10,11,16 and 17] [in favour of assesses]" 15. Reliance is also placed on the recent judgement of Hon'ble ITAT Surat Bench in case of NYA International vs Principal Commissioner of Income-tax in ITA No. 57/SRT/2022 wherein it was held that - "26, We are aware of the fact that the Assessing Officer's rote while framing an assessment is not only an adjudicator. The assessing officer has a dual role to dispense with i.e. he is an investigator as well as an adjudicator; therefore, if he fails in any one of the role as afore-stated, hi....
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.... its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made."(emphasis supplied) 17. Reliance is also placed on the following judicial pronouncements 0s welt wherein if the issues have been already examined in the course of assessment proceedings nothing can form basis of revisionary proceedings u/s 263 of the IT Act, 2016. a. Reliance Payment Solutions Ltd. vs PCIT [336 taxmann.com 277] dated 21.03.2022 b. M/s Time City Real Estates vs Pr CIT [ITA No. 67/Lkw/2021] dated 30.08.2022 c. M/s Gujarat State Lion Conservation Society vs CIT....
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.... will accordingly apply to the assessment year 2021-22 and subsequent assessment years. [Clauses 8 and 9]" Therefore, the issue raised by your honour regarding Alliance Commodities Pvt Ltd has already been examined by the learned assessing officer during the assessment proceedings and hence, the order passed by the assessing officer cannot be termed as erroneous. Thus, it is prayed that the proceedings should not be initiated u/s 263 of the Act. Hence, we request your honour to kindly consider the above submission and do not initiate the proceedings u/s 263. In case your honour is not satisfied with the contention we request your goodself to kindly provide at least one opportunity of video conferencing to the assessee." 7. However, ld. PCIT rejected the contention of the assessee and noted that contention of the assessee is not acceptable as the company, Alliance Commodities Ltd. (PAN AAGCA7943M) from which the assessee has accepted loan during the year under consideration, is a strike off company (whose registration has been cancelled by MCA). The company which is not in existence for the year under consideration is not capable of advancing any unsecured loan to the assessee. H....
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....ons with company whose registration has been cancelled by MCA was under due scrutiny while completing the assessment u/s 143(3) of the Act. The ld Counsel pointed out that notice u/s 142(1) of the Income Tax Act, dated 10.01.2020, was issued wherein Question no.3, 4, 5 and 8 specifically covered all the matters related to transactions with company whose registration has been cancelled by MCA and assessee has replied these questions to the assessing officer, therefore assessing officer made enough enquiry about the issue on unsecured loan, hence order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue. 11. In regards to the issue of Provident Fund expense, it was submitted by ld Counsel that the payment has been made within 8 days of the due date for the month of May 2017 i.e. on 23.06.2017 wherein the due date was 15.08.2017 via online portal. It is pertinent to note that the assessee- company has been regular with its payments of provident fund throughout the year except for the month of May 2017, since in the year under consideration i.e. 2017-18, the online payment of PF was introduced and the assessee had a shift from off line to ....
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....tal income (vide Pb.105 to 106), (4) Ledger account (vide Pb.107), (5) Contra account (vide Pb.108), (6) Extract of bank statement of Dena Bank (A/c. No.002411023964) (vide Pb.109), (7) Extract of Bank Book of Dena Bank A/c. (vide Pb.110), (8) PAN card of the assessee-company (vide Pb.111). 15. We have examined the above documents and evidences. We note that during the assessment proceeding, the assessing officer has raised the following questions, in respect of issue raised by ld PCIT: Question No. 3- Please furnish Party wise details of unsecured loans obtained during the year, including squared off loans along with confirmations in the following format: Question No.4 -If the loan providing entity is companies then kindly confirm its status on MCA. Question No. 5- Kindly submit documentary evidence to corroborate the identity and creditworthiness of the company and genuineness of the transaction with such company which has ceased to exist. Question No. 8- Please provide the details of expenses along with justification thereof for Salary, Wages & Bonus Expenses and Manufacturing Expense. 16. In response to the above questions assessee subm....
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....ither erroneous nor prejudicial to the interest of revenue. 19. The assessing officer examined the books of accounts, documents and evidences submitted by the assessee and applied his mind. That is, the AO examined the copy of acknowledgement of return of income, PAN Card, Bank statement and ledger account of such company whose registration has been cancelled viz Alliance Commodities Pvt Ltd for AY 2018-19. The assessing officer conducted sufficient inquiry. To gather more information and then prove the claim of the assessee wrong is not the object of section 263 of the Act. The object of section 263 is to examine whether order passed by the AO is erroneous as well as prejudicial to the interest of revenue. Therefore, based on this factual position, the order passed by the AO under section 143(3) should not be erroneous. We note that Coordinate Bench of I.T.A.T., Kolkata in the case of Plastic Concern vs. ACIT [61 TTJ 87 (Cal) has held that mere possibility of gathering more material to prove the claim of the assessee wrong would not make the concluded assessment erroneous so long as the ld. A.O. had acted judiciously and conducted enquiries in the course of assessment proceedin....
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....ive occasion to the Commissioner to pass order u/s 263 of the Act, merely because the Commissioner has a different opinion in the matter and that only in cases where there is no enquiry, the power u/s 263 of the Act can be exercised. The ld. PCIT cannot pass the order u/s 263 of the Act on the ground that further/thorough enquiry should have been made by AO. 21. Further, it was settled by Hon`ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT [(2000) 243 ITR 83 (SC)] wherein it was held that if the A.O. adopts one of the possible courses available in the scheme of the I.T. Act which results in any loss of revenue or when two views are possible and the A.O. adopts one of them with which the C.I.T. does not agree, then it would not be an order prejudicial to the interest of revenue for invoking the jurisdiction u/s. 263 of the Act. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below: "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 ....
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....red with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue." 23. The aforesaid position gets further strength from the decision of Hon'ble jurisdictional High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee is quoted below : "85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order-sheets go to show that heard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: "that judicial and official acts have bee....