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2022 (3) TMI 466 - AT - Income TaxRevision u/s 263 by CIT - limited scrutiny case - labour and wages payable which are beyond the scope of limited scrutiny for verification of sundry creditors - HELD THAT:- We find that when the return of income was selected for scrutiny, only information which was available with the department was the return of income filed online containing particulars as per the financial statements and not hard copy of the financial statements filed subsequently and therefore, what has been selected for examination is the figure of sundry creditor by the Assessing officer and during the course of assessment proceedings, the Assessing officer basis such selection has proceeded to examine the sundry creditors as part of limited scrutiny assessment to which the assessee has voluntary participated without raising any objections and supplied information/documentation and therefore, where the ld. PCIT issues a show cause u/s. 263 regarding the matter relating to examination of labour and wages payable, we do not find any infirmity in the said action in his assumption of jurisdiction u/s. 263 which is well within the limited scrutiny for which the matter was initially selected for examination by the Assessing officer. Where the matter is selected for precise reason for examination of labour and wages payable, certain basic questions arises for consideration which a person of reasonable intellect and understanding should raise and examine. Firstly, who are these persons - whether regular employees or hired through a third party, name and address and other basic identification particulars of these persons who are hired and terms of such hiring in terms of salary/wages/social security, etc., work/project for which they are hired and their attendance records, etc to establish actual rendering of services and period/hours of service, payment/muster rolls etc showing salary/wages payable, actual payment and whether liable for TDS and actual TDS done and deposited in their respective accounts. And in respect of old outstandings, the persons in respect of whom the amount has remained outstanding, the period and reasons for such outstandings and whether any payments have been made during the year or not and applicability of TDS on such payments. Therefore, where the ld. PCIT has stated that besides ledger account, there is no documentation on record in support of such expenses, we agree that the Assessing officer did not make proper and adequate enquiries while making the assessment. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld. PCIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it as rightly highlighted by the ld. PCIT in terms of complete lack of documentation, old outstandings, payment in cash, etc, then mere calling for the details of labour and wages payable and accepting the ledger account containing incomplete details and without calling for further information/documentation and conducting independent enquiries cannot be held as conducting proper enquiry. Therefore, on this account, we agree with the findings of the ld. PCIT that proper enquiries have not been conducted by the AO and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue. It is not a case where the ld. PCIT has set-aside the assessment order rather he has examined these transactions and has carried out broad analysis of the ledger account so submitted by the assessee company and has come to a conclusion that the AO has failed to carry out adequate and proper enquiries which he should have conducted in respect of labour and wages payable. - Decided against assessee.
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