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TMI Blog2017 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Assessment order dated 29.06.2016 was passed u/s 143(3) accepting the returned income of Rs. 32,21,460/-. The books of account and vouchers were produced and examined by the Assessing officer. 3. The Principal Commissioner of Income Tax(Central) [PCIT], Gurgaon, issued notice u/s 263 dated 21.10.2016, seeking to revise the assessment order passed u/s 143(3). The PCIT was of the view that the assessment order was passed without making proper inquiries/ verification/investigations which should have been made before accepting the trading results/other issues and therefore, the order is erroneous and prejudicial to the interest of revenue. The PCIT issued show cause notice u/s 263 in respect to the following issues: i. Trading results accepted without making thorough inquiry/investigation and genuineness of sales/purchases accepted without enquiring or investigating independently ii. AO has not examined disallowance u/s 14A iii. Allowability of foreign travel expenses not examined by the AO iv. Genuineness of godown rent not examined. 4. In response to the show cause notice, the assessee submitted that the assessment order is not erroneous and prejudicial to the interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment de novo, after making necessary inquiries/verification/ investigations. Against the order of the ld. PCIT u/s 263 of the Act, the assessee has preferred this appeal before us on the following grounds: "1. The notice issued under section 263 by the Principal Commissioner of Income Tax (Central) (hereinafter referred to as "Pr CIT") and the order passed under section 263 are illegal, bad in law and without jurisdiction. 2. That having regard to the facts and circumstances of the case, Pr. CIT has erred in law and on facts in assuming jurisdiction in passing the order u/s 263, more so when the assessment order passed under section 143(3) is neither erroneous nor prejudicial to the interest of Revenue. 3. That having regard to the facts and circumstances of the case, Pr. CIT has erred in setting aside the assessment order passed under section 143(3) of the Act by the Assessing Officer on the ground that 'no detailed investigations' have been carried out by the Assessing Officer. 4. That PCIT has erred on fact and in law in not appreciating that the reply in specific reference to fall in Gross Profit and Net Profit as compared to earlier years, was inquired during the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions made in response to notice u/s 263 of the Act have not been considered at all by the PCIT. It is submitted that the purpose of a show cause notice is to enable the person, against whom action is sought to be taken, to defend his case and the same rests on the principles of natural justice. Serving a show cause notice is not an empty formality and therefore, the principles of natural justice are not met by merely issuing a show cause notice. The PCIT has to apply his mind to the submissions made by the assessee in response thereof and has to dispose off the objections raised by the assessee before arriving at a finding that the order is erroneous and prejudicial to the interest of the justice. Therefore, the PCIT has himself erred by not adhering to the principles of natural justice and it is trite law that any order passed in violation of principles of natural justice is invalid and liable to be quashed. 9. The appellant had filed replies before the ld. PCIT dated 03.02.2017 along with supporting documents, which are placed at Page 71 to Page 420 of the paper book, in response to the show cause notice dated 21.10.2016 issued by ld. PCIT u/s 263. However, a perusal of the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evision proceedings in order to carry out fishing and roving enquiries in the matters which are already concluded by the AO and therefore the exercise of jurisdiction u/s 263 of the Act is bad in law. The ld. PCIT has erred in exercising jurisdiction u/s 263 of the Act when the issues raised therein were already enquired into by the AO during the assessment proceedings. The AO had passed the assessment order only after conducting detailed enquiry on various issues including trading results, allowability of expense and disallowance u/s 14A of the Act. The assessment order is passed after due application of mind, therefore the impugned notice and order u/s 263 of the Act alleging that proper and adequate enquiry was not made, rendering the Assessment Order erroneous and prejudicial to the interest of revenue, is arbitrary based on conjecture and surmises. The ld. PCIT has not given any finding as to how and in what manner the order of the AO on the various issues noted in its order u/s 263 of the Act was erroneous and prejudicial to the interest of the Revenue. The ld. PCIT has not made any enquiry on his own but simply directed the AO to make further verification and examination the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by AO. 14. It is submitted that even though there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 is inserted, w.e.f. 01.06.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction u/s 263 to revise every order of the AO to re-examine the issues already examined during the course of assessment proceedings. The Hon'ble Mumbai ITAT has dealt with Explanation 2 as inserted by the Finance Act, 2015 in the case of Narayan Tatu Rane v. Income Tax Officer [(2016) 70 taxmann.com 227] to hold that the said Explanation cannot be said to have overridden the law as interpreted by the Hon'ble Delhi High Court, according to which the Commissioner has to conduct an enquiry and verification to establish and show that the assessment order is unsustainable in law. The Tribunal has further held that the intention of the legislature could not have been to enable the PCIT to find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of any exempt income u/s 14A, hence there are no interest expense relating to exempt income. This clearly shows that the AO had conducted an enquiry regarding the issue of disallowance u/s 14A and the same was duly replied by the assessee. Therefore, it is not a case of 'no enquiry' where the PCIT can exercise its jurisdiction u/s 263, hence the order u/s 263 is illegal, bad in law and without jurisdiction. iv. Foreign Travel Expense/Godown Rent under Administrative and other expenses * It is argued that the AO vide questionnaire u/s 142(1) had sought the justification of all the expenses which were debited in the Profit & Loss Account [relevant question being 15] and in response to this, the assessee had furnished complete details of various expenses along with the ledger account wherein all the requisite details were given. Books of account and vouchers were produced and examined by the AO. The details have been asked by the AO and as such it cannot be said that no enquiry was made. The expenses have been allowed after due examination. Reliance was placed on this Hon'ble Tribunal's decision in Vodafone Essar South Ltd. v. CIT ([2011) 12 taxmann.com 233), which is further a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and perused the documents available on record. 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 explanation regarding fall in GP rate was duly given. A specific query was raised in respect of disallowance during the course of assessment proceeding to which reply was filed by the assessee that there is no exempt income and provisions of section 14A of the Act will not be applicable. The details of traveling expense and godown rent expense were duly filed before the AO. 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. 19. The assessee had filed various replies to the ld. PCIT in response to notice u/s of the Act 263 of the Act stating that all the issues raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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