TMI Blog2021 (1) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... find these are already shown in the balance sheet since assessment year 2001-02 which is not in dispute. Therefore, once the assessee sells these properties during impugned assessment year there was no necessity for the AO to again re-examine the cost of purchase and cost of improvement once those were accepted in the past years u/s 143(3) proceedings. So far as the Deposits and withdrawals in the capital account of the partners are concerned, we find these are already recorded in the books of accounts which were produced before the AO who has examined the same on test check basis and has passed the order u/s 143(3). Therefore it cannot be said that the order passed by the AO is erroneous and prejudicial to the interest of the revenue on this issue. It is the settled proposition of law that for invoking jurisdiction u/s 263 of the Act the twin condition namely that a) the order is erroneous and (b) the order is prejudicial to the interest of the revenue must be satisfied. In the instant case the order may be prejudicial to the interest of revenue but certainly cannot be called as erroneous. We, therefore, find force in the arguments of the Ld. Counsel for the assessee that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of ₹ 58,77,675/- is debited in the P L A/c . The AO accepted the version of the assessee and did not make any independent enquiry to verify the genuineness of the same. iii) It is noticed that in P L Account the assesee has shown profit on sale of property at ₹ 75,07,860/- whereas in computation of income statement, long term capital gain of ₹ 56,27,736/- has been declared. The AO did not make any enquiry in this regard and this issue has been left to be examined by him, for the reason that neither the purchase deed nor the sale deed of property was procured by him to verify the information provided by the asessee firm in this regard. As per computation chart, sale price and purchase price of the said property are shown at ₹ 1,48,840/-. All these facts could be verified only if bills in respect sof improvement cost had been procured by the AO besides purchase and sale deed of the property but he failed to do so. iv) As per capital account of partners, addition in capital and withdrawal from capital a/c of the partners, are as under :- Description Dhan Pal Gupta Amit Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry at her end, in the absence of which, the issues could not had been set aside and no directions could had been issued to the A.O. for read-judicating those issues. 3. That the impugned asstt. u/s. 143(3) has been framed by the Ld. A.O. after calling for the explanations, after examining the books of accounts alongwith the bills and vouchers, as specifically noted by the A.O. in Para-4 of Asstt. Order and thereafter the A.O. has taken a proper and legal possible view on all the issues, which is not found apparently or otherwise by the Ld. Pr. CIT either erroneous or prejudicial to the interest of revenue, hence the Ld. Pr. CIT exceeded her jurisdiction in invoking the provisions of Sec.263 under the facts and circumstances of the case 4. That under the facts and circumstances the Ld. Pr. CIT erred in law as well as on facts and also exceeded her jurisdiction in directing the A.O. to make independent enquiry / investigation to ascertain authenticity and genuineness of supplementary partnership deed, more so when, it is applicable from A.Y.12- 13 and the effect thereof has already been given by the deptt. in A.Y.12-13 as well as in A.Y.13-14 u/s.143(3). 5. That under the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he salary payable to partners is ₹ 13,20,000/- the Ld. PCIT directed the AO to verify the authenticity and genuineness of the supplementary deed as a condition for allowing the above salary on the ground that the AO did not procure the amended supplementary deed. He submitted that the supplementary deed is applicable with effect from assessment year 2013-14. The AO had completed the assessment u/s 143(3) for assessment year 2013-14 wherein salary to partners stands accepted after examining the necessary documents as thought proper by the AO. Since there is no change on this issue in assessment year 2014-15, therefore, there is no requirement of law to examine the supplementary partnership deed in assessment year 2014-15. Further, the remuneration has been allowed in assessment year 2014-15 as per the law and as in the past. 8. The ld. Counsel for the assessee submitted that the AO has examined the issues relating to salary and interest to partners. He submitted that the AO during the course of assessment proceedings, had asked to furnish the details of payment made to related persons which obviously included salary and interest to partners. Referring to page 19 and 20 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined the purchase and sale deeds and found no discrepancy, therefore, there was no requirement of law to send it back for fresh examination. He submitted that complete working of capital gain was furnished before the AO for his examination and the ledger account of the properties in the books were also examined by the AO. Therefore, there is no need of sending it back for further examination. 11. So far as the 3rd issue i.e. to ascertain the genuineness of transactions of deposits and withdrawals in the capital account of partners is concerned, Ld. Counsel for the assessee submitted that the copies of partners capital account were furnished to the AO during the course of assessment proceedings which were examined. Further all the partners are separately assessed to income tax and copies of their income tax returns were filed. Further the deposits are very small and less than the amount of withdrawal. Since the AO had verified all the details furnished before him and was satisfied, therefore, the order of the AO cannot be held to be erroneous and prejudicial to the interest of the revenue. 12. Ld. Counsel for the assessee submitted that the extent of enquiry is the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the order passed by the Ld. PCIT should be set aside and the grounds raised by the assessee be allowed. 16. We have considered the rival arguments made by both the sides, perused the orders of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the original assessment in this case was completed u/s 143(3) on 4.11.2016 determining the total income of the assessee at ₹ 68,38,200/- as against the returned income of ₹ 65,88,200/-. We find Ld. PCIT examined the records and noted that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue on three issues i.e (a) salary and interest to the partners has not been examined by the AO properly especially when there is a supplementary partnership deed (b) AO has allowed the long term capital gain claimed by the assessee without examining the cost of improvement claimed by the assessee and (c) there are certain additions in capital account and withdrawal from capital account of the partners and the AO has not examined the same properly. He therefore, set aside the order of the AO and direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the rate of interest clause in the supplementary deed dated 30th March 2012 and such interest has been allowed in the past on that basis and also in the immediately preceding assessment year i.e 2013-14 where the order was passed u/s 143(3). Further, the salary paid to the partners is within the limit prescribed u/s 40(b)(v) of the Act which is as per the original deed dated 4th February, 2008. Even otherwise also on the basis of supplementary partnership deed dated 30th March, 2012 effective from 1.4.2012 i.e relevant to assessment year 2013-14 the salary to partners has been allowed at ₹ 13,20,000/- in the order passed u/s 143(3). Therefore, we find no reason as to why the AO shall again go through the same when the salary paid to the partners is in consonance with the salary paid in assessment year 2013-14. 20. So far as the cost of improvement and the cost of properties for computation of LTCG is concerned, we find these are already shown in the balance sheet since assessment year 2001-02 which is not in dispute. Therefore, once the assessee sells these properties during impugned assessment year there was no necessity for the AO to again re-examine the cost of purch ..... 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