TMI Blog2023 (5) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, hold that the PCIT is not justified in invoking jurisdiction u/s 263 on the first issue i.e. low income from liquor trade. PCIT held the order to be erroneous and prejudicial to the interest of the Revenue for which he has invoked the provisions of section 263 i.e. non-verification of introduction of capital and withdrawal - Since AO in the instant case has not called for any information on the issue of introduction of capital and withdrawal and since there is nothing on record to show that the assessee has explained the source of introduction of such capital, therefore, the order of the AO on this issue has become erroneous and prejudicial to the interest of the Revenue and therefore, the PCIT, in our opinion, was fully justified in invoking revisional power u/s 263 of the I.T. Act. We, therefore, uphold the order of the PCIT invoking the jurisdiction u/s 263 of the Act on the second issue i.e. introduction of capital and withdrawal. - ITA No.69/Hyd/2022 - - - Dated:- 28-4-2023 - Shri R.K. Panda, Accountant Member AND Shri K. Narasimha Chary, Judicial Member For the Assessee : Shri P. Murali Mohan Rao, CA For the Revenue : Shri Rajendra Kumar, CIT(DR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be reasonable income in liquor trade, when the books are rejected or non-verifiable. The explanation of the assessee for low income was that this is the first year of operation and the commercial operation started late in the financial year. However, according to the PCIT, the explanation given by the assessee should not have been accepted by the Assessing Officer. He further noted that the assessee has substantial turnover and after taking into account, the license fee of Rs.51,29,000/-, there is no gross profit. In fact, there is a loss. This according to him is not acceptable. 6. He further observed that the assessee has introduced capital of Rs.1,25,95,000/- and withdrawn Rs.74,95,000/- and no explanation was called for by the Assessing Officer regarding the source of such capital. He should have examined this aspect also. He was of the opinion that the order passed by the Assessing Officer has become erroneous and prejudicial to the interest of the Revenue. He therefore, issued a notice u/s 263 of the I.T. Act and asked the assessee to explain as to why the order passed by the Assessing Officer u/s 143(3) dated 13.12.2018 should not be set aside as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted the returned income and the books of account were never rejected. 10. Referring to the decision of the Hon'ble Punjab Haryana High Court in the case of PCIT vs. Kanin (India) reported in (2022) 141 taxmann.com 83, he submitted that the Hon'ble High Court in the said decision has upheld the order of the Tribunal quashing the 263 proceedings where revision order was passed by Principal Commissioner holding that assessment made by Assessing officer was erroneous and prejudicial to interest of revenue as Assessment Order had been passed without making inquiries or verification, however, Principal Commissioner was not in a position to point out as to what inquiries or verification should have been made but had not been made by Assessing Officer so as to make the case fall within Explanation 2(a) to section 263. 11. Referring to the decision of the Coordinate Bench of the Tribunal in the case of M/s. Southern Realtors Towers (P) Ltd vs. Dy.CIT vide ITA No.607/Hyd/2018 for the A.Y 2013-14, order dated 6.12.2018 he submitted that the Tribunal in the said decision has held that the CIT cannot direct the Assessing Officer to redo the assessment without pointing ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT Hyderabad 15. The learned Counsel for the assessee submitted that according to the PCIT, the profit in the liquor trade has been determined at 3% to 5% when books of account are rejected. However, in the instant case, the books of account are not rejected, therefore, the question of estimation of income does not arise. He submitted that the PCIT cannot force the Assessing Officer to forcibly increase the profit of the assessee by rejecting the book results without any valid reasons. 16. The learned DR, on the other hand heavily relied on the order of the learned PCIT. He submitted that when the case was selected for complete scrutiny, the Assessing Officer was supposed to go deep into the matter and should have passed a detailed speaking order by giving the reasons for low income shown by the assessee and the increase in the capital. However, no such examination was done by the Assessing Officer. Therefore, it is a clear case of non-application of mind by the Assessing Officer for which the order has become erroneous and prejudicial to the interest of the Revenue. Therefore, the PCIT was fully justified in assuming the jurisdiction u/s 263 of the I.T. Act and thereby se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f license fee of Rs.51,29,000/- and the assessee has shown nominal expenses under various other heads. After crediting the commission of Rs.2,63,765/- and the rent of Rs.7,49,742/- and scrap sales of Rs.9,75,258/- the assessee has declared net profit of Rs.92,641/-. The profit and loss account shows that this is the first year of the business and the assessee has debited a huge amount of license fee for the liquor trade which is not in dispute. The assessee during the course of assessment proceedings has furnished a cash flow statement and bank statement, note on low income from TCS, details of bank deposits etc. The Assessing Officer, on the basis of those details accepted the returned income and passed the order. Under these circumstances, it is to be examined as to whether the order passed by the Assessing Officer has become erroneous and prejudice to the interest of the Revenue so as to enable the PCIT to invoke jurisdiction u/s 263 of the I.T. Act. 21. We find the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd vs. CIT (2000) 243 ITR 83 (S.C) has held that The phrase prejudicial to the interests of the revenue has to be read in conjunction with an errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st issue i.e. low income from liquor trade. 24. However, there is also another issue on which the learned PCIT has held the order to be erroneous and prejudicial to the interest of the Revenue for which he has invoked the provisions of section 263 of the I.T. Act i.e. non-verification of introduction of capital of Rs.1,25,95,000/- and withdrawal of Rs.74,95,000/-. A perusal of the reply given by the assessee before the PCIT clearly shows that the case was selected for complete scrutiny and accordingly notices u/s 143(2) and 142(1) were issued. However, the Assessing Officer has not asked a single query to the assessee about the introduction of capital of Rs.1,25,95,000/- and withdrawal of Rs.74,95,000/-. When the case was selected for complete scrutiny, it was incumbent upon the Assessing Officer to call for the details about the introduction of huge capital of Rs.1,25,95,000/- and withdrawal of Rs.74,95,000/-. Since the Assessing Officer in the instant case has not called for any information on the issue of introduction of capital of Rs.1,25,95,000/- and withdrawal of Rs.74,95,000/- and since there is nothing on record to show that the assessee has explained the source of intro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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