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2016 (3) TMI 643 - ITAT KOLKATA

2016 (3) TMI 643 - ITAT KOLKATA - TMI - Revision u/s 263 - Held that:- AO has applied his mind or not need not necessarily be determined from what has been stated in the assessment order alone, it has to be examined as to whether any inquiry was at all conducted by the AO. There exists a difference between lack of inquiry and inadequate inquiry. If there were any inquiry, even inadequate that would not give an occasion to exercise jurisdiction u/s 263 of the said Act. Accordingly, order passed b .....

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ary enquiry has been made by the AO at the time of assessment. On the other hand the ld. DR failed to controvert the arguments of the ld. AR. In view of we reverse the order of the ld. CIT(A) under section 263 of the Act. - Decided in favour of assessee - ITA No.2290/Kol/2014 - Dated:- 10-2-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant Shri R.R.Modi, FCA For The Respondent : Shri S.Srivastava, CIT-DR ORDER PER Waseem Ahmed, Accountan .....

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ion of jurisdiction under section 263 by Ld. CIT is erroneous and bad at Law. 3. That the passing of order by Assessing Officer is neither erroneous nor prejudicial to Revenue. 4. For that the Ld. CIT erred in writing the nature of expense as Personal Recruitment Cost instead of Personal Recruitment Cost meaning - employee recruitment expense. The expenses were primarily paid to two consultants for the purpose of recruiting personnel 5. For the Ld. CIT erred in confirming the inter company loan .....

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is ₹ 108.39 lacs which is much higher than the stated book profit. 7. For the Ld. CIT erred in attraction of section 40A(2)(b) for huge remuneration amounting to ₹ 124.12 lacs paid to key management personnel when an amount was paid to senior mining professionals and other full time employees of the Company having sound business knowledge and profound experience in the field and having no shareholding in the company. The salary paid is considered reasonable commensurate to the specia .....

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to conduct the necessary enquiry in respect of the following expenses : 1) The assessee claimed personnel recruitment expenses in the profit & loss account for ₹ 22,87,960.00 and the last year such expense was ₹ 1410.00 only. 2) The assessee provided interest free loan of ₹ 42,79,700.00 to its associated concern, namely, M/s Thaiess Mines without charging any charges thereon. On the other hand, the Company has paid interest amounting to ₹ 1.85 crores on the money borr .....

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see stand as under : 1) Personnel Recruitment Cost - ₹ 22,87,960/-. It is submitted that the nature of expense is not personal as mentioned in the Notice. It is Personnel meaning employee recruitment expenses. The expenses were primarily paid to two consultants - ABC Consultants P. Ltd. a renowned Pan India manpower recruitment / placement consultant ₹ 16.67 lacs and Info Edge India P Ltd. (naukri.com) a popular employment website - ₹ 6 lacs. 2) Inter - Company Loan to M/s Thie .....

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₹ 108.39 lacs which is much higher that the stated book profit. Therefore the provisions for MAT do not apply in the instant case. 4) Remuneration paid to Key managerial Personnel (KMP)-Rs.124.12 lacs. It is submitted that specified KMP are Mr. Christian Fosterling and Dr. Raman Srikant. Assessee-company is in the business of undertaking Mining contract Both the persons are senior mining professionals and employees of the company. Mr. Christian Fosterling is an internationally expert engin .....

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an employer fixing the remuneration is entitled to consider the extent of business, the nature of duties to be performed, roles and responsibility, the qualification, special aptitude and experience of the employee, future prospects of extension of the business and a host of other related circumstances. The company has paid salary as per the terms of employment contract. The salary paid is considered reasonable commensurate to the specialized skill and rich experience of the concerned employees. .....

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Besides the above, assessee also submitted the assessment proceedings u/s 143(3) of the Act before the ld.CIT that assessment was framed u/s 143(3) of the Act is made by the AO after detailed and proper enquiry and after consideration of various documents and records filed by the assesseecompany from time to time in response to the requirements of the AO. During the course of assessment proceedings, AO verified and responses to notice issued u/s. 133(6) and after being satisfied about genuinenes .....

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discussion I am of the view that the assessment required reconsideration therefore, the assessment order passed by the AO is set aside DENEVO, directing AO to make a fresh assessment after providing adequate opportunity of being heard to the assessee. Being aggrieved by this order of Ld. CIT assessee preferred an appeal before us. Shri R.R. Modi, Ld. Authorized Representative appearing on behalf of assessee and Shri S.Srivastava, Ld. Departmental Representative appearing on behalf of Revenue. 4 .....

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s placed which was also produced before the AO. Our attention was drawn to page No. 42 of the paper book where the invoice of INFO EDGE (India) Ltd. was placed. Ld. AR further submitted that a notice was issued to M/s ABC Consultants Pvt. Ltd. u/s. 133(6) of the Act for the confirmation. In this connection, Ld. AR submitted the address vide letter dated 07.02.2014, which is placed on page No. 58 of the paper book. The reply of ABC Consultants Pvt. Ltd. to the ITO is placed on at page 68 of the p .....

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sessee and the landlord for the rent and provision for municipal tax was furnished which is placed on pages 62 to 65 of the paper book. Regarding the issue of MAT calculation Ld. AR drew our attention on page No.40 of the paper book where the computation of MAT was duly furnished for the consideration of ITO at the time of assessment. Regarding the issue of remuneration paid to three managerial personnel, it was submitted that the remuneration paid to the employees is considered reasonable and c .....

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erest of Revenue. Now to arrive at the correct conclusion of the case, we deem it necessary to reproduce the relevant provisions of section 263 of the Act. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, my, after giving the assessee an opportunity of being heard and after making or causing to be m .....

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; and (ii) Is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and 4) He has to make or cause to make such enquiry as he deems necessary; 5) He may pass such order thereon as the circumstances of the case justify including, (i) An order enhancing or, (ii) Modifying the assessment or (iii) Cancelling the assessment and directing a fresh assessment. 6.2 Now in the light of above words, we have to examine as to whether the order of .....

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necessary enquiries have been made by AO at the time of assessment then it is inappropriate to hold the order erroneous and prejudicial to the interest to revenue. We also find that the Hon ble courts have quashed the proceedings u/s/. 263 of the Act where the necessary enquiries have been made by AO at the time of assessment further we find support from the order of However, we find from decision of Hon ble Allahabad High Court in the case of Principal Commissioner of Income Tax vs. M/s Ashok H .....

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sufficient to debar the authorities from exercising the powers u/s 263 of the Act. The Tribunal was accordingly justified in setting aside the order passed u/s 263 of the Act. We do not find any substantial question of law arising for consideration the appeal is accordingly dismissed. In the case one hand, the AO has made an addition by disallowing the commission expenses after making the necessary enquiry. The instant case is duly covered with the decision of Hon ble Allahabad High Court M/s A .....

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