TMI Blog2020 (2) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly speaks of indifferent conduct by the AO accepting the book results. Therefore, the cause of action did exist for invocation of Section 263 of the Act. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is self-revealing in the context of the case. In order to invoke Section 263 of the Act, the competent authority is required to find that order sought to be revised is erroneous and caused prejudice to the Revenue. A lack of inquiry on a pertinent point which demonstrates possible revenue leakage of staggering amount would definitely tantamount to the order being both erroneous as well as prejudicial to the interest of the Revenue. Consequent upon the action of Pr.CIT, the assessment order is merely cancelled and set aside to the file of the AO for making relevant inquiries as specified for which objective material is available at the threshold. The assessee has not estopped in any manner from dealing with the inquiry as specified to the AO and to rebut the perception on error in the original order. The assessee is not prevented from supporting its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT, Circle-4(1)(1), Ahmedabad, accepting the returned income. 3. From perusal of the P L Account, Schedule-22 thereof, the assessee has shown pending expenses of ₹ 4,94,83,747/- as on 31/03/2014. No such pending expenses was shown outstanding as on 31/03/2013. It is noticed that the assessee has completed the project during the year and sold the inventories and finished goods i.e. flat yet to be sold at the end of the year, is only ₹ 2.41 Crores, whereas the sale accounted during the year ₹ 30.16 crores. Therefore, the inventories outstanding, is less than 10% of the sales. The A.O. while completing the assessment had not at all examined that when the project has been completed, the pending expenses cannot exist. 3.1 Secondly, the assessee has not considered the expenses pending as part of value of WIP/finished goods. This has made the assessment erroneous and the assessment order passed by the A.O. is erroneous and prejudicial to the interest of Revenue. 4. In view of the above, it is evident that the assessment order in the assessee company s case for the year under reference has been passed by the assessing officer without proper inquiry, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 3rd wing of the project stood completed within next three months. In the circumstances, 36% of the expenses remaining outstanding in such a completed project status is not manifestly justified and provides cause of action for proper enquiry to ascertain the nature and bonafides of claims made. The Pr.CIT also observed that out of details of₹ 4.94 Crores submitted by the assessee, the pending amount towards services and labour cost charge itself stands at ₹ 2.55 Crore. The verification towards genuineness and business connection of such expenses was imperative. The AO has also not verified whether the TDS has been deducted on such expenses as per the provisions of law. Having observed these infirmities, the Pr.CIT set aside the assessment passed under s.143(3) of the Act with a direction to the AO to make requisite enquiries and verifications in this regard. 5. Aggrieved by the revisional action of the Pr.CIT setting aside the original assessment made under s.143(3) of the Act, the assessee preferred appeal before the Tribunal and challenged the usurpation of the revisional jurisdiction by the Pr.CIT. 6. The learned senior counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exercise of quasi-judicial function cannot be dislodged in a light hearted manner in the name of inadequacy in enquiries or verification as perceived in the opinion of the revisional authority. 7. The learned senior counsel accordingly concluded that the exercise of supervisory jurisdiction of review by the Pr.CIT is not compatible with the scope and ambit of Section 263 of the Act. It was thus submitted that Pr.CIT was not justified in invoking its power under s.263 of the Act to set aside the assessment framed in the absence of any perceptible cause of action. 8. The learned CIT.DR, on the other hand, relied upon the order of the Pr.CIT. In furtherance, the learned DR submitted that the revisional order has pointed out visible abnormality in the outstanding and pending expenses of revenue nature claimed to be relatable to the residential project qua the attendant facts and circumstances. The learned CIT.DR submitted that such huge amount of outstanding expenses in relation to project as compared to Nil outstanding in the earlier year ought to have evoked a minimum appetite for enquiry on behest of the AO more particularly when the entire project stood completed and ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been passed in discharge of quasi-judicial function and is unworthy of reliance. The learned CIT.DR made reference to the decision of the co-ordinate bench of Tribunal in Gayatri Enterprises vs. ITO ITA No.825/Ahd/2016 order dated 28.02.2019 and Babulal S. Solanki vs. ITO 104 taxmann.com 155 (Ahmedabad-Trib.) and submitted that there overtly exists non application of mind on a core issue and the claim of the assessee towards asymmetric outstanding expenses accepted without any tangible enquiry is self-evident from the assessment records. The Pr.CIT has rightly dislodged such assessment order passed by the AO in a routine and perfunctory manner. The learned DR submitted that mere filing of certain ledger accounts in support of such abnormal outstanding expenses without any corresponding enquiry in the given set of facts warranted some positive enquiry as to how such large pending expenses has cropped up and continued to remain outstanding in the current year against the Nil pending expenses in the preceding year. The existence of abnormal outstanding in the context of total expenses booked would inevitably trigger enquiry in the mind of any rational person. It was further conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the umbrella of revisonary powers is entitled to upset the finality of assessment proceedings before the AO where the AO has allegedly committed error in passing assessment order without proper verification of expenses claimed. 9.3 On perusal of the show cause notice and consequent revisional order passed by the Pr.CIT under s.263 of the Act, we notice that the declaration made by the assessee towards outstanding / pending expenses of revenue nature was abnormally high in the context of the facts and circumstances of the case as noted in para 4 (supra). The Pr.CIT on facts has observed that such unusually large and disproportionate expenses claimed to remain outstanding at the end of the year would warrant some enquiry to peep into the bonafides of the claim. The outstanding expenses were shown to be nearly 36% of the total direct expenses which is apparently very high more particularly when the development project stood completed and the 90% of the total inventory were also sold before the end of the FY 2013-14 in question. To satisfy the anxiety of the bench on the allegations labeled against the AO, the assessment records were also produced by the Revenue. A perusal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile discharging its statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. While holding so, we alive to the plea on behalf of the assessee that reasonable details were placed with regard to the pending expenses. We are not impressed by such line of argument when tested on the touchstone of Section 263 of the Act. The record clearly speaks of indifferent conduct by the AO accepting the book results. Therefore, the cause of action did exist for invocation of Section 263 of the Act. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is self-revealing in the context of the case. 9.5 We also would like to take note of objection on behalf of the assessee that the Pr.CIT has objected to the action of the AO inter alia on the ground of deduction of TDS on pending expenses claimed apart from their genuineness and business connection. It was contended on behalf of assessee that the Pr.CIT could not have added this facet in the revisional order without giving opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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