2017 (12) TMI 189 - ITAT DELHI

Revision u/s 263 - proof of AO's order erroneous and prejudicial to the interest of revenue - non reference of matter to TPO - Held that:- We are of the view that the AO had issued a detailed questionnaire raising various queries. The appellant had appeared from time to time and filed the detailed replies to all the queries raised. Books of account were produced along with the supporting vouchers which were examined by the AO. The confirmed copies of account with PAN numbers of the parties to whom sales and purchases were made, were filed before the AO.

The details of commission expense alongwith PAN numbers and TDS deducted were duly filed before the AO. The AO had raised a specific query about fresh loans raised during the year and reply was filed that no fresh loans were raised. The sales made to four/five parties as referred in the order u/s 263 of the Act has been made with profit margin of 19% which is more than the industry norm. A note was given alongwith the balance sheet that’s AS 11 is not applicable to the assessee. The foreign exchange fluctuation is duly recorded in the books of account. It is not the case of the ld. PCIT that Books of account have not been examined by the AO. The interest relating to the capital WIP is already capitalized by the Assessee. The assessee had made purchases/imports from two parties on CIF basis. It is not the case of the LD. PCIT that purchase vouchers and books of account were not produced before the AO during the course of assessment proceedings. Hence it cannot be said that this is a case of no enquiry made by the AO. Merely because the ld. PCIT feels that further enquiry should have been made does not make the order of the AO erroneous.

We are also of the view that as per instruction no. 3 of 2016, it was not mandatory for the AO to make a reference to TPO. The assessee had explained before the ld. PCIT that its case does not fall under the conditions referred to in the instruction no. 3 of 2016 and as such it wasn’t obligatory for the AO to make a reference to TPO. The ld. PCIT has not dealt with this contention of the assessee and has given a bald finding that AO should have referred to TPO as per instruction no. 3 of 2016. The ld. PCIT has not specified under which condition of instruction No. 3 of 2016, the AO should have referred to TPO.

The assessee had filed various replies to the ld. PCIT in response to notice u/s 263 of the Act stating that all the issues raised by the ld. PCIT have been examined by the AO during the course of assessment. The ld. PCIT has ignored the replies of the assessee. He merely states that the reply has been filed by the assessee but he nowhere discusses the contentions raised by the assessee and why he does not agree with the contentions of the assessee. The ld. PCIT has merely remitted the matter back to the AO without making any enquiry himself. The ld. PCIT has mentioned that the fresh loans have not been examined by the AO. The ld. PCIT has not considered the contentions of the assessee that there is no fresh loan. Similarly, the other replies of the assessee filed during the course of assessment and in response to notice u/s 263 of the Act have been totally ignored. No enquiry has been made by the ld. PCIT. - Decided in favour of assessee.