TMI Blog2023 (5) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s. 263 - it is incumbent upon the Pr. CIT to examine such details and give specific direction. The order of Pr. CIT in revising the order of AO in respect of allowance of deduction under rent expenses is not maintainable for the reason the order of AO cannot be held to be erroneous, thus, it is not prejudicial to the interest of Revenue. Freight outward expenses - We note that a provision is made by an assessee as obligation to pay as a result of past event. To meet the said expenditure the assessee can make provision to settle the obligation basing on a reasonable estimation of amount to meet that payment of obligation. In the present case,we find no details of payment were furnished before us. Therefore, we find force in the arguments of DR in supporting the order of Pr. CIT in restoring the said issue to the file of AO for his fresh verification. No infirmity in the order of Pr. CIT in revising the original assessment order as erroneous and prejudicial to the interest of Revenue to the extent of freight outward expenses - Accordingly, the order of Pr. CIT is upheld in this aspect. Appeal of assessee is partly allowed. - ITA No.488/PUN/2020 - - - Dated:- 3- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05-03-2019 and drew our attention to para 4 of the said notice. He drew our attention to para (ii) of the impugned order and argued that though the Pr. CIT reiterated the issue in respect of claim of rent expenses at Rs.3,38,93,133/- no specific direction was given in para 3 of the impugned order. He submits that the Pr. CIT has to give specific direction to the AO in terms of provisions u/s. 263 of the Act. He drew our attention to paras 3.1 to 3.7 and vehemently argued that there was no clear finding by way of a direction to the AO regarding the issue of claim of rent expenses. He drew our attention to para 4.1 of the impugned order and argued that the Pr. CIT specifically relying on the decisions mentioned therein and held the AO did not carry out requisite inquiries/verification. Further, he also held that the AO did not examine the issues properly, correctly in required/desired manner vide para 3 of the impugned order. The ld. AR argued that the additions made by the AO in pursuance of general directions by the Pr. CIT u/s. 263 of the Act is not maintainable and drew our attention to the case laws Paper Book-1 in support of his contentions. 6. The ld. DR argued that the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 263 of the Act held the above said assessment order is erroneous and prejudicial to the interest of Revenue and restored the matter to the file of AO for proper enquiries on the issues indicated in the show cause notice and also in paras 3, 3.1 and 3.7 of the impugned order. 8. We note that the contention of ld. AR is that the AO conducted inquiries in detail in respect of claim of rent expenses and there was no specific direction by the Pr. CIT in this regard to the AO in the impugned order. In view of the same let us examine the record to find out whether the AO conducted inquiry or not. The ld. AR filed Paper Book-1 containing 525 pages and Paper Book-II in continuation, up to 546. We find notice dated 27-02-2017 issued by the AO u/s. 142(1) of the Act at page Nos. 526 to 532 of the Paper Book-II. On perusal of the same, we note that at point No. 39 the AO asked the assessee to furnish details of lease rent payments shown in profit and loss account for each party in the format tabulated therein. On an examination of the said format, we note that the AO asked the assessee to furnish details of property taken on lease, name, address and PAN of lessee, amount of lease rent pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incumbent on the PCIT to conduct such inquiry. He vehemently argued in the present case also there was no specific finding by the PCIT and simply restored the issue to the file of AO for his fresh examination. 10. The ld. DR placed reliance on the decision of Hon ble Supreme Court in the case of CIT Vs. M/s. Paville Projects Pvt. Ltd. in Civil Appeal No. 6126 of 2021 and argued that the facts and circumstances of the present case are identical to the facts before the Hon ble Supreme Court and submits that the Hon ble Supreme Court upheld the order passed by the PCIT u/s. 263 of the Act in holding that the assessment order is erroneous and prejudicial to the interest of Revenue for accepting the contention of payment made to shareholders as cost of improvement. He argued that the decision of Hon ble Supreme Court is applicable to the facts on hand. 11. We note, in the present case, as has been discussed above already in the aforementioned paragraphs admittedly there was no inquiries conducted by the Pr. CIT in respect of claim of rent expenses. We find the explanation of the assessee in the revision proceedings u/s. 263 of the Act in response to show cause notice at page 60 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court was pleased to hold that the Hon ble High Court has committed a very serious error in setting aside the order passed by the CIT in exercise of powers u/s. 263 of the Act and upheld the order passed u/s. 263 of the Act by the CIT. On a careful reading of the decision of Hon ble Supreme Court, it is noted that the CIT therein concluded that the cost of improvement does not fit into the definition of section 55(1)(b) of the Act and held the same is chargeable to tax, which means, that the order passed by the AO therein was based on incorrect assumption of facts and also on incorrect application of law, whereas, in the present case is a case of admissibility of claim in respect of rent expenditure incurred under the head Rent . The case of Pr. CIT in the present case was that there was no proper inquiries conducted by the AO in the original assessment proceedings. We note that the Pr. CIT did not make any reference or whatsoever that the AO allowed rent expenses as deduction not in accordance with law. We find the AO exercised his jurisdiction in examining the details of rent expenditure and allowed the same as deduction, in accordance with law. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the provision cannot be allowed as deduction unless the assessee shows the actual payment. He submits that the assessee is entitled to claim deduction under actual payment but no details were submitted by the assessee even before the Pr. CIT claiming payments were made actually. It is an admitted fact that no details of actual payments were even submitted before the Pr. CIT as well as before us. We note that a provision is made by an assessee as obligation to pay as a result of past event. To meet the said expenditure the assessee can make provision to settle the obligation basing on a reasonable estimation of amount to meet that payment of obligation. In the present case, as discussed above, we find no details of payment were furnished before us. Therefore, we find force in the arguments of ld. DR in supporting the order of Pr. CIT in restoring the said issue to the file of AO for his fresh verification. Thus, we find no infirmity in the order of Pr. CIT in revising the original assessment order as erroneous and prejudicial to the interest of Revenue to the extent of freight outward expenses of Rs.26,35,415/-. Accordingly, the order of Pr. CIT is upheld in this aspect. 14. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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