TMI Blog2017 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 PCIT have been examined by the AO during the course of assessment. The 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 opening stock has not been verified by the AO, whereas the total opening stock was pledged with the bank. The ld. PCIT has not considered the contentions of the assessee. 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 PCIT. It was incumbent for the PCIT to make some minimum independent enquiry to reach to the conclusion that the order of the AO is erroneous and prejudicial to the interest of revenue. -Decided in favour of assessee. - SA No. 452/DEL/2017 And ITA No. 3206/DEL/2017 - - - Dated:- 29-11-2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 5. As regards the trading results and sales/purchases, the assessee contended that explanation for the fall in gross profit and net profit and complete quantitative detail along with value of opening stocks, purchases and sales made during the year and closing stocks at the end of year both in quantity and value were furnished during the assessment proceedings and all the sales and purchases are fully vouched and supported by invoices and all the payments are through account payee cheques. Valuation of stocks fully supported with documentary evidences and day to day stock records were filed before by the assessee before the PCIT and it was submitted that these were produced before AO. 6. As regards the genuineness of opening stock, the assessee submitted that the stocks in question were under financed from bank and were under pledge with the banks. In support of the same, the assessee filed confirmation certificates regarding funds availed against the pledged stocks. Regarding the alleged discrepancy in sales made during the year, the assessee submitted that sales were made only during the period when rates were favourable. The assessee submitted complete party wise deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication of mind and after considering the detailed replies on various dates as filed before him during the course of assessment proceedings. 6. That the PCIT has failed to appreciate that details of expenses were filed as required by the AO and the assessment order has been passed after due application of mind. 7. That having regard to the facts and circumstances of the case, Pr. CIT has erred in invoking the provision of Section 263 in reference to disallowance u/s 14A of the Act without appreciating that Assessee did not earn any exempt income during the relevant AY, hence no disallowance was warranted u/s 14A of the Act. 8. That the assessment order passed after detailed enquiries does not become erroneous merely because CIT feels that further enquiries should have been made. Hence the notice issued U/s 263 and the order passed u/s 263 is illegal, bad in law and without jurisdiction. 9. That without prejudice, the PCIT has wrongly and illegally held that the order passed by AO is erroneous and prejudicial to the interest when no independent enquiry has been made by PCIT. Hence the notice issued U/s 263 and the order passed u/s 263 is illegal and bad in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed u/s 263 of the Act as illegal and bad in law. Opportunity of being heard is little more than serving a notice on assessee. It is not an empty formality. The PCIT has nowhere in its order u/s 263 of the Act recorded the explanations given by the assessee in response to the 263 of the Act show cause notice. PCIT has not even looked at the replies filed by the Appellant in response to notice u/s 263 of the Act and has passed the order U/ 263 of the Act. Therefore, the order of the ld. PCIT is patently illegal, bad in law and the same is liable to be quashed. 10. It is further argued that the order is passed after making inquiries or verification which should have been made. The AO, exercising its quasi-judicial power, had issued a detailed questionnaire u/s 142(1) of the Act which was duly answered by way various details, explanations and letters. Complete books of account, details of sales/purchases, supported with documentary evidences were produced and examined by the AO during the assessment proceedings. The appellant had appeared before the AO and filed replies, however, the ld. PCIT has completely ignored the detailed enquiry conducted by the AO and has, therefore, erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/2017] has categorically held that for the purpose of exercising jurisdiction u/s 263 and reaching a conclusion that the order is erroneous and prejudicial to the interest of revenue, the ld. PCIT has to undertake some minimal inquiry and in fact where the ld. PCIT is of the view that AO had not undertaken any inquiry, it becomes incumbent on the PCIT to conduct such enquiry. Further in PCIT v. Modicare Limited [ITA No. 759/2017] Delhi High Court has followed its decision in Income Tax Officer v. DG Housing Projects Limited [343 ITR 329], DIT v. Jyoti Foundation [357 ITR 388] and PCIT v. Delhi Airport Metro Express Pvt. Ltd. (supra) to hold that the exercise of jurisdiction u/s 263 of the Act cannot be outsourced by the CIT to the AO and therefore, the CIT cannot direct the AO to provide details of the facts on the basis of which the proceedings u/s 263 could have been initiated. 13. In the instant case, the ld. PCIT, unmindful of the enquiries conducted by the AO during the assessment proceedings and submissions made by the assessee in response to notice u/s 263, has merely observed that the assessment order was passed without making proper enquiries and it is a matter of reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary opinion. 15. It is argued that the impugned order u/s 263 seeks to revise the assessment order in respect of the issues which were already examined by the AO during assessment proceedings. The appellant also filed a detailed chart to support his arguments i. Alleged non-verification of purchase and sales and trading results of the assessee; Genuineness of Sales/purchases made by the assessee It is submitted that during the course of assessment proceedings, specific query w.r.t. sales and purchases/trading results was made vide questionnaire dated 05.04.2016 issued u/s 142(1) [relevant question being 11, 20, 22, 25] and the assessee had furnished categorical reply to the same along with all the required details of purchase/sales. Confirmed copies of accounts with PAN numbers from whom sales and purchases were made, were filed before the AO. The said details are part of the assessment record and it was only after examining the said details, the AO had passed the assessment order. ii. Fall in G.P. and N.P. The PCIT has assailed the assessment order on the ground that there is fall in G.P. as well as N.P. It is submitted that the AO vide questionnaire u/s 142(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of PCIT and submitted that the ld. PCIT has rightly exercised the jurisdiction u/s 263 of the Act setting aside the assessment order. The Ld. DR submitted that even though the PCIT in its order u/s 263 has not expressly noted the submissions of the assessee made in response to the show cause notice u/s 263, yet it cannot be said that the submissions of the assessee were not considered by the PCIT. The Ld. DR contended that the order u/s 263 has been passed after duly considering the submissions made by the PCIT in this behalf. 17. The Ld. DR heavily placed reliance on the Explanation 2 to section 263. She argued that the ld. PCIT has passed the order u/s 263 by invoking Explanation 2 to section 263, even though the same is not expressly written in the order. The DR also stated that issue of disallowance u/s 14A of the Act has also not been examined by the AO and no disallowance was made by him. During rebuttal the counsel for the appellant argued that admittedly the ld. PCIT, while passing the impugned order u/s 263, has not invoked Explanation 2 to section 263 and therefore, the Ld. DR cannot take support of the same to justify the exercise of jurisdiction by the PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 opening stock has not been verified by the AO, whereas the total opening stock was pledged with the bank. The ld. PCIT has not considered the contentions of the assessee. 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 PCIT. It was incumbent for the PCIT to make some minimum independent enquiry to reach to the conclusion that the order of the AO is erroneous and prejudicial to the interest of revenue. The reliance is rightly placed on the decisions of Delhi High Court in PCIT v. Delhi Airport Metro Express Pvt. Ltd. (supra) and Income Tax Officer v. DG Housing Projects Limited (supra). The Hon ble Delhi High Court in Delhi Airport Metro Express Pvt. Ltd. (supra) e has made the following observation: 10. For the purposes of exercising jurisdiction under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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