TaxTMI 
TaxTMI 
2017 (12) TMI 308
X X X X Extracts X X X X
X X X X Extracts X X X X
....uly examined and considering facts while framing the assessment order U /s 143(3) of Income Tax Act, 1961. The Hon'ble CIT has erred in raising the issues and making rowing enquiries in the Proceedings u/s 263 of the Income Tax Act, 1961. Further Order u/s 263 is also passed without any conclusion merely setting aside the assessment to the file of the learned assessing officer which is unjustified. It is therefore submitted that the order passed u/s 263 should be cancelled. 2. Without prejudice to ground No. 1 The CIT has erred in directing the Assessing officer to verify the details relating to training expenses incurred on the director of the Appellant company, Mr. Arnav Kasliwal of Rs. 29,80,200/ -. The Pr. CIT failed to appreciate that the Assessment order u/s 143(3) of the Income Tax Act,1961 dated 27.03.2015 was passed by the A.O.. after considering the entire material on record and applied his mind during the course of Assessment proceeding u/ s 143(3). The issue raised with regard to Training Expenses was duly examined and the same cannot be considered in the Order U/s 263 of the Income Tax Act, 1961. In conclusion, CIT has set aside the order without examining the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were related to undergraduate programmes being undergone by Shri. Arnav Kasliwal in USA. The learned Pr. CIT observed from his PAN details observed that Date of Birth(D.O.B.) of Sh. Arnav Kasliwal is 11.04.1992 . The learned Pr. CIT asked the assessee to furnish the date as to when Sh. Arnav Kasliwal was inducted as Director into Board of Directors and the documentary evidences submitted before Registrar of Companies(ROC) w.r.t. appointment of Sh. Arnav Kasliwal as Director of the assessee company. On verification of records for A.Y 2010-11, 2011-12 and 2012-13, the learned Pr. CIT observed that it did not reflect that said Sh. Arnav Kasliwal was the Director of the assessee company. It was observed by learned Pr. CIT that it was only because of non verification of records and lack of proper enquiry by the A.O that resulted in allowing such expenditure which could not have been allowed. The learned Pr. CIT observed that the A.O. has clearly failed to make proper enquiries on this specific claim made by the assessee . The learned Pr. CIT held that the assessment order dated 27-03-2015 passed by the AO u/s 143(3) is erroneous and prejudicial to the interest of the Revenue. The learn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expenses by the AO vide assessment order dated 27-03-2015 passed u/s 143(3). It was submitted that there is no discussion in the A.O.'s assessment order w.r.t. this claim of the assessee towards training expenses. Our attention was drawn to paper book / page no. 12B /12C wherein the notice u/s 142(1) along with questionnaire dated 09-01-2015 issued by the AO are placed . It was submitted that details of all the Directors with their PAN, addresses, email contact details as were asked for by the AO during the assessment proceedings were submitted before the AO. Our attention was also drawn to page no. 13 of the paper book wherein the assessee has duly submitted desired details of the Directors to the AO vide letter dated 22-1-2015 . Our attention was also drawn to page no. 15 where in the list of Directors filed before the AO is placed which included name of Sh. Arnav Vikas Kasliwal who was appointed as Director of the assessee company on 05-05-2010 . Our attention was also drawn to page no. 16/paper book wherein the reply dated 10.02.2015 to the A.O. is enclosed wherein all the details being ledger account of training expenses incurred by the assessee were given to the AO., which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al services covered for deduction of tax u/s 195, which is placed in file. It is claimed that now department cannot take different stand as consistency is to be maintained. The Ld. CIT-DR on the other hand submitted that the assessee has accepted on merit that he has concealed the particulars as the said expenses were not towards training expenses but were education expenses of Sh. Arnav Kasliwal leading to award of graduation from University of Pennsylvania, USA . The attention of the Bench was drawn to the Resolution passed by the assessee company on 07-05-2010 which is placed in paper book/page 24 wherein the Board of Directors approved incurring of education expenses of Sh. Arnav Vikas Kasliwal being paid to University of Pennsylvania SA . It was submitted that the assessee is claiming that the A.O had made enquiries but the A.O did not make any enquiry as to the training expenses . It is submitted that said Sh Arnav Kasliwal is pursuing regular course being education pursued by Sh. Arnav Kasliwal at USA which leads to the award of graduation degree. It is submitted that the assessee is builder and there are no revenue from operations during the impugned year under considerati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see company. It is further submitted that copy of board resolution authorising the payment of training expenses is already submitted to your honour vide our submission date 18.02.2015 . It is submitted that Mr. Arnav Kasliwal had gone for training and completing the internal baccalaureate from the University of Pennsylvania. It is submitted that all the supporting documents relating to the training is submitted to your honour vide submission dated 18.02.2015 .It is submitted that this activity of providing training to the directors is well within the objects of the assessee company. It is also submitted that Directors Training expenses is an allowable expenditure U/s 37(1) of the Income Tax Act,1961." It was at this stage submitted by learned counsel for the assessee that Mr. Arnav Kasliwal was pursuing MBA course with University of Pennsylvania, USA for which education expenses were borne by the assessee company which were claimed as business expenses since May, 2010 . Our attention was also drawn to page 24/paper book wherein Resolution passed by the Board of Directors of the assessee company on 07.05.2010 is placed wherein the education expenses of Shri Arnav Kasliwal to be in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1) dated 02.03.2015, which were duly replied for by the assessee vide letters dated 18.02.2015 and 05-03-2015 wherein complete details of training expenses along with Board Resolution dated 07-05-2010 approving such expenses, along with supporting bills issued by University of Pennsylvania, USA were submitted before the AO in the course of assessment proceedings u/s 143(3) r.w.s. 143(2), which are placed in paper book filed with the tribunal. It was claimed by the assessee that A.O has duly verified all the training expenses and allowed the same after making necessary enquires during the course of assessment proceedings u/s 143(3) r.w.s 143(2) . It was also claimed that assessee has incurred these training expenses during the AY 2012-13 for training of Director of assessee company Mr Arnav Kasliwal at University of Pennsylvania, USA and completing internal baccalaureate for University of Pennsylvania, USA . It was claimed that said expenses were business expenses allowable u/s. 37(1) of the Act as the said expenses were incurred for objects of the assessee company wholly and exclusively for the purposes of business of the assessee and hence the same should be allowed as business e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es of Shri Arnav Kasliwal, Director of the assessee company to be incurred by the assessee for his education at University of Pennsylvania, USA. The said Board Resolution passed by Board of Directors of the assessee company on 07-05-2010 is reproduced hereunder : " CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF HANUMESH REALTORS PVT. LTD HELD AT ITS REGISTERED OFFICE ON 7TH DAY OF MAY 2010 AT 10.00 AM "RESOLVED that consent of the Board be and is given to the company to incur education expenses of Shri Arnav Vikas Kasliwal Director of the Company being paid to University of Pennysylvania by the company. "RESOLVED FURTHER that copy of the resolution duly certified as True by the any one of the Directors is given to the Bank" CERTIFIED TRUE COPY BY ORDER OF THE BOARD SD/- Director " On the strength of the above Board Resolution and invoices issued by University of Pennsylvania, USA, it is claimed by the assessee that the said expenses incurred on education of said newly appointed Director namely Sh. Arnav Kasliwal at University of Pennsylvania, USA are business expenses of the assessee company which are wholly and exclus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g his term of appointment as well likely benefit to arise to the assessee from these education expenses paid by the assessee company to University of Pennsylvania, USA for education of Sh Arnav Kasliwal are brought on record. It is not shown by the assessee what are the roles, responsibility and job profile of Sh Arnav Kasliwal being performed for the assessee company and on what terms and conditions he was brought in as Director of the assessee company .Even course content of the course being studied by said Mr Arnav Kasliwal with University of Pennsylvania, USA and its correlation with the assessee's business was not brought on record by the assessee before the AO. It is only before the Bench at the fag-end of the hearing, it is brought on record by ld counsel for the assessee that said Mr Arnav Kasliwal was persuing MBA course and that too through the statement made by learned counsel for the assessee. The said expenses of Rs. 29,80,200/- were reflected by the assessee under the head 'training expenses' in the audited financial statements as also before the AO it was claimed that these expenses are towards training of the said Director, but these expenses are pertaining to the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the assessee, which has certainly rendered AO assessment order as erroneous as well prejudicial to the interest of Revenue amenable to interference by learned Pr. CIT by invocation of revisionary powers u/s 263 as the said expenses stood allowed as business expenses despite being absence of relevant and tangible material on record before the AO. The enquiry conducted by the A.O was clearly vitiated due to absence of such crucial and vital information on record in the absence of which and based on material which was on record, the AO could not have formed an opinion and have come to the conclusion that these are business expenses incurred wholly and exclusively for the purposes of business satisfying the mandate of Section 37(1), making assessment order being erroneous and prejudicial to the interest of Revenue liable to revisionary powers u/s 263 by learned Pr. CIT. In our considered view, the learned Pr. CIT has rightly invoked the provision of Section 263 of the Act vide orders dated 30-03-2017 by setting aside the assessment order dated 27-03-2015 passed by the AO u/s 143(3) and directing AO to pass denovo assessment order after verifications as per directions of learned Pr. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heme of the 1961 Act which will certainly cause loss of Revenue to the Department in years to come if the said educations expenses are not disallowed and brought to tax, which of course the AO will now decide after due verifications as is mandated by learned Pr. CIT vide orders dated 30-03-2017 u/s 263. The assessee has relied upon the decision of Hon'ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT (supra), in this case Hon'ble Supreme Court has held that in order to invoke provisions of Section 263, the assessment order of the AO ought to be erroneous so far as it is prejudicial to the interest of Reevnue. The twin conditions have to be satisfied simultaneously before invoking powers u/s 263. If the AO has duly applied his mind and adopted one of the permissible view, learned CIT cannot invoke powers u/s 263 to substitute his views unless the view of the AO is unsustainable in law. In the instant case before us, the material placed by the assessee before the AO was not sufficient to come to the conclusion that the expenses incurred by the assessee on education of newly inducted Director were for the business purposes allowable u/s 37(1) . The view which....