TMI Blog2019 (3) TMI 1870X X X X Extracts X X X X X X X X Extracts X X X X ..... O for determination of ALP cannot be the basis to say that the AO made adequate and due enquiries before completing the assessment. The law is well settled that failure on the part of the AO to make proper and adequate enquiries renders his order erroneous and prejudicial to the interests of revenue. See GEE VEE ENTERPRISES VERSUS ADDITIONAL COMMISSIONER OF INCOME-TAX, DELHI I, AND OTHERS [ 1974 (10) TMI 29 - DELHI HIGH COURT] There was a failure on the part of AO to make any enquiry with regard to payments made to Ansys Inc., USA in the light of provisions of section 40(a)(ia) of the Act. In that view of the matter, we are of the view that the jurisdiction u/s. 263 of the Act was rightly invoked by the CIT. We are also of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,35,35,177 Less: Cost of unearned Revenue (1,60,54,115) Net Cost of Purchases 19,52,64,129 Add: Other incidental direct costs as regard to purchase of Software Custom Duty : ₹ 37,06,559 Clearance Charges : ₹ 1,98,486 Inward Freight : ₹ 1,53,389 Other charges : ₹ 3,68,144 44,26,578 Total Cost of Sales 19,96,90,707 3. Since the above transactions are international transactions, the ALP in respect of international transactions, the Arms Length Price (ALP) in respect of international transaction had to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and did not make enquiries in this regard, the order of AO was erroneous and prejudicial to the interests of revenue. A show cause notice u/s. 263 dated 05.03.2012 was accordingly issued by the CIT. 6. The assessee vide reply dated 20.03.2012 took a stand that the assessee deducted tax on the following payments:- Particulars Amount paid/credited in Rs. TDS in Rs. ANSYS Inc, USA 9,09,37,457 1,36,40,752 Livermore Software Technology Corporation, USA 10,31,826 1,54,774 7. The assessee pointed out that the ITAT in assessee s own case for AYs 2002-03 to 2004-05 in its orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that in a case where the Assessing Officer allowed certain claims/tax credits without indicating the basis of the same in the assessment order, make the order erroneous and prejudicial to the interest of the revenue. It is held that reasons for conclusion arrived at by the Assessing Officer should be forthcoming in the assessment order. 8. In view of the discussion made above, the assessment order is set aside with a direction to make a fresh assessment order by invoking the provisions of section 40(a)(i) of the Act in respect of the payments made by the assessee to a foreign company as discussed above. Adequate opportunity of being heard shall be given to the assessee by the assessing officer. 9. Aggrieved by the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, whether there is an obligation to deduct tax at source on payments made to Ansys Inc., USA, it is irrelevant because jurisdiction u/s. 263 has been invoked by the CIT on the ground that the AO before completing the assessment failed to make adequate and proper enquiries with regard to such obligation. According to him, in the present case, there was a failure on the part of the AO to make enquiries in this regard and therefore jurisdiction u/s. 263 of the Act was rightly invoked by the CIT. 12. We have given a careful consideration to the rival submissions. As rightly contended by the ld. DR, the jurisdiction u/s. 263 of the Act has been invoked by the CIT on the ground that AO, before completing the assessment, failed to make proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word erroneous in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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