TMI Blog2021 (11) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri Rasesh Shah, CA For the Revenue : Shri Ritesh Mishra, CIT(DR) ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: In this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax, Valsad [in short the ld. PCIT ] under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 23.03.2017. Grievances raised by the assessee are as follows 1. On the facts and circumstances of the case as well as law on the subject, Ld Principal Commissioner has erred in passing order u/s 263 of the Act. 2. On the facts and circumstances of the case as well as law on the subject, Ld Principal Commissioner has erred in passing order u/s 263 of the Act observing that assessing officer has failed to initiate penalty u/s 271(1)(C) of the Act. 3. It is prayed that above order passed by Principal Commissioner of Income-tax may please be quashed/set aside. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal. 3. The relevant material facts, as culled out from the material on record, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of revenue on account of the following:- (a) The case was selected under scrutiny under CASS on account of large 'other expenses' claimed in the P L account amounting to ₹ 8.16 crores under the head 'cost of goods produce', ₹ 74.77/- lacs under the head 'selling and administrative expenses' and ₹ 69.13 lacs under the head 'Financial Charges' but the AO has not carried out the required verification in respect of any of the major expenses debited to P L account. So much so that there are cash payments made to some of the parties to whom the payments by cheque have also been made. There is no reason/justification for the assessee to make cash payments to the same party to whom the payments by cheque are being made unless there is one off emergency situation with justifiable reasons. (i) For example, in the case of Maruti Infrastructure there are cash payments amounting to ₹ 3,15,237/- and most of these payments are shown to have been made in the month of January to March, 2012 on the dates in near vicinity of each other. The total payments to these parties amount to ₹ 1.42 crores and the other payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts Corporation are on record but there all unsigned copies having no evidentiary value whatsoever. (f) The AO has not examined the possibility of applicability of section despite the fact that there are investments in NPI Co-operative Society and shares in Palsana Industrial Association, amounting to ₹ 45.28 lacs. (g) There are payments made to the parties hit by the provisions of section 40A(2)(b),of I.T. Act, 1961, including interest on loan to M/s Poonam Paints and interest on capital to partners, besides the remuneration to partners. The AO has not examined rather not obtained even loan confirmations in respect of unsecured loans from M/s Poonam Paints and capital contribution by partners. 5. Therefore, in view of the observations in para-4, the order of the AO is erroneous as well as prejudicial to the interest of revenue due to almost complete absence of any inquiry on the above mentioned issues despite the fact that the case was selected for scrutiny for verification of 'large other expenses claimed in profit and loss account' necessitating the revision of the order of the AO by invoking the provisions of section 253 of I T. Act. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order dated 14.11.2014 under section 143(3) has been passed by the AO without making any inquiries whatsoever in respect of the issues as mentioned hereinabove. Therefore, the assessment order of the AO dated 14.11.2014 was set-aside by the ld PCIT and directed the assessing officer to make fresh assessment after giving proper opportunity to the assessee. 8. Aggrieved by the order of the ld. PCIT, the assessee is in appeal before us. 9. Shri Rasesh Shah, Learned Counsel for the assessee begins by pointing out that during the assessment proceedings, the Assessing Officer has issued notice u/s 142(1) of the Act wherein the Assessing Officer has raised all the queries / questions which are raised by the Ld. PCIT in his order u/s 263 of the Act. In response to queries raised by the Assessing Officer u/s 142(1) of the Act, the assessee has submitted his reply along with evidences. The Assessing Officer after going through the reply of assessee has passed order u/s 143(3) of the Act, dated 23.12.2014. Therefore, order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of revenue. He further contends that in order to invoke the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack trap stone. In the course of assessment proceedings, assessing officer made the detailed inquiry by issuing not only notice u/s 143(2) but also u/s 142(1) of the Act. In the course of assessment proceedings, assessee produced the books of accounts in response to notice issued u/s 143(2) of the Act. The assessing officer issued notice u/s 142(1) of the Act, requiring details, including production of books of accounts by the assessee along with the bills and vouchers for verification. In response to notice issued u/s 142(1) of the Act, assessee furnished part details vide letter dated 08.12.2014. The remaining details were furnished vide letter dated Nil along with production of books of accounts including supporting vouchers and documents at the time of the hearing. The assessing officer therefore passed the assessment order after making full inquiry as he should have made. After making inquiry, the assessing officer made the lump sum addition of ₹ 1,40,000/- out of labour and carting expenses as per para no. 5 of the assessment order on the ground that certain vouchers are defective. Even before making the addition of ₹ 1,40,000/-, assessing officer issued the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Sr. No. Name of party Relevant Head of Audit Report Amount 1. Maruti Infrastructure Mining Expenses 1,20,92,886/- 2. Raj Supplier Loading and Carting Expense 30,60,143/- 3 Shantilal C Patel Loading and Carting Expense 39,40,151/- 4. Vijaybhai C Patel Loading and Carting Expense 44,33,345/- 5. Uday earth Movers Mining Expenses 9,99,998/- 6. Sawariya Earch Movers Mining Expenses 6,88,124/- 7. Poonam Prints Interest on unsecured Loan 24,01,034/- 8. Payment to partners Interest on partners capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them to attend. Although, ld PCIT made the detailed inquiry and he didn t issue further show cause notice stating the reasons of his dissatisfaction on assessee s submission. 14. We note that assessee has filed the complete details as per notice under section 142(1) of the Act. The assessee also produced the books of accounts along with the vouchers and supporting evidence in the course of assessment proceedings. After verification, the assessing officer accepted assessee s return of income making addition of ₹ 1,40,000/- as disallowance of labour and carting expenses. The books of accounts of the assessee are audited u/s 44AB of the Act and return of income is also supported by audit report in Form No. 3CB 3CD. In support of the expenses, assessee furnished the bank statement, details of the expenses exceeding ₹ 5 lakhs debited in the trading account and details of the expenses exceeding ₹ 1 lakh claimed in the Profit and Loss account. Further, assessee also furnished the details of the sundry creditors along with PAN and address. In the course of assessment proceedings, assessee also furnished the details of turnover with gross profit and net profit alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Ganpat Ram, Bishnoi [296 ITR 0292] wherein it was held that no presumption can be drawn that the Assessing Officer had not applied his mind to various aspects of the matter. Once enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, the invocation of jurisdiction by CIT is not sustainable. If a query is raised during the course of scrutiny by the assessing officer, which was answered to the satisfaction of the assessing officer, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the assessing officer called for interference and revision . On the similar facts, the reliance is placed on the decision of Hon`ble Delhi High Court in case of CIT vs. Vikas Polymers [341 ITR 537] (Delhi HC). The assessing officer has made the proper inquiry which was adequate. If there was any inquiry even inadequate that by itself would give no occasion to the CIT to pass orders u/s 263 of the Act, merely because he has a different opinion in the matter. 16. We note that Hon`ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable to him when he has exercised power. It was further held by Apex Court that PCIT should give the proper reasons. 18. In any event, we note that the Assessing Officer has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the revenue as held by Hon ble Supreme Court in Malabar Industries Ltd. vs. CIT,243 ITR 83(SC). Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is null in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Learned Principal CIT. Therefore, we quash the revision order of the ld Principal CIT dated 23.03.2017 being ab initio void. 19. In the result, the appeal filed by the assessee is allowed. Order is pronounced on 22/10/2021 by placing result on Notice Board. - - TaxTMI - TMITax - I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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