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TMI Blog2023 (6) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case as well as in law, the Hon'ble PCIT has erred in taking the view that the addition made by the AO u/s 68 of the Act of Rs.1,82,46,940/- is short by Rs.44,03,060/- and thereby setting aside the assessment order passed by the A.O with the direction to pass the fresh assessment order after considering above view, whereas above view of ld. PCIT is clearly a case of taking another possible view and whereas the issue of impugned addition u/s 68 is already subject matter of appeal before the CIT(A) [doctrine of merger]. The order passed by ld. PCIT is not only based on incorrect view but is also beyond the scope of S. 263 of the Act. Appellant pray for quashing the order passed u/s 263 of the Act. 3) The appellant craves leave to add, alter, or delete or modify any grounds of appeal." 3. The facts necessary for disposal of the appeal are stated in brief. The assessee before us is an individual and filed her return of income for assessment year (A.Y.) 2018-19 on 31.10.2018, declaring total income at Rs.4,87,080/-. Subsequently, assessee`s case was selected for complete scrutiny to verify the issue of unsecured loan and transactions with the company whose registration ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inting Mills Pvt Ltd has been found to be non-genuine, therefore the entire amount of Rs.2,26,50,000/- being the loan taken, during the year under consideration was required to be treated as unexplained cash credit and added to the total income of the assessee for the year under consideration. However, the Assessing Officer has made addition of Rs.1,82,46,940/- only i.e. being the balance at the end of the year. Therefore, Assessing Officer ought to disallow the balance amount of Rs. 44,03,060/- (Rs.2,26,50,000- Rs.1,82,46,940). Since the Assessing Officer has not disallowed the amount of Rs.44,03,060/- therefore ld PCIT noted that Assessing Officer has passed the assessment order without proper verification on the above mentioned issue of unsecured loan from a company whose registration was cancelled by MCA, without application of his mind. This makes the assessment order passed for A.Y 2018-19 u/s 143(3) r.w.s. 143(3A) r.w.s. 143(3B) of the Act dated 11.02.2021 erroneous in so far as it is prejudicial to the interest of the Revenue within the meaning of Section 263 of the Act. 7. Therefore, ld PCIT issued a show cause notice bearing DIN No.ITBA/COMF/17/2022-23/1047657169(1) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed the appeal before ld CIT(A) against the addition of Rs.1,82,46,940/- and ld CIT(A) by exercising his power u/s 251 of the Act may enhance the assessment. Hence, ld PCIT by exercising his jurisdiction u/s 263 of the Act, need not to enhance the assessment especially when the appeal of assessee is pending for adjudication before ld CIT(A). Therefore, the issue which is subject-matter of adjudication by Ld.CIT(A) should not have been revised u/s 263 of the Act, hence ld Counsel stated that jurisdiction exercised by ld PCIT u/s 263 of the Act is bad in law. 12. The ld Counsel also pointed out that Assessing Officer has already considered the issue about struck off the company's name from the Registrar of Companies. The assessee-company's name was struck off by MCA after the assessment order framed by the Assessing Officer. Therefore, assessee-company was in existence at the time when the assessment proceedings were going on. 13. On merit, Ld. Counsel submitted that Ld. PCIT has taken a different view than the possible view taken by the Assessing Officer. The Ld. PCIT invoked the jurisdiction on such issue which has been properly examined by the Assessing Officer. During the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal of merger, the respondent now cannot exercise revisional powers. Counsel relied on the decision of this Court in case of Commissioner of Income tax v. Nirma Chemicals Works (P.) Ltd. 309 ITR 67. 8. On the other hand, learned counsel Ms. Bhatt opposed the petition contending that the petitioner has approached at a stage where the Commissioner has merely issued a show-cause notice. Prima facie it emerges from the record that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. She lastly contended that the issue of the purchases made by the petitioner from M/s. Tarini Trading Pvt. Ltd. being bogus, was not part of the proceedings before the Appellate Commissioner. 9. We have recorded the broad controversy and the different stages through which the matter proceeded. To recapitulate, relevant facts, in the reassessment proceedings the assessee's purchases from M/s. Tarini Trading Pvt. Ltd. to the tune of Rs. 4.33 crores came up for detailed examination by the Assessing Officer. He examined the Director of the said seller who appeared before him and confirmed the sales. The Assessing Officer did not dispute this transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r argues that the entire purchases were bogus. The Assessing Officer accepted the purchases as genuine but added certain amount on the premise that the assessee's profit from such dealings would have been higher than disclosed. The entire issue was at large before the Appellate Commissioner. It is well known that the Commissioner (Appeals) while hearing the assessee's appeal has powers to even enhance the assessment. If he was of the opinion that not only limited additions made by the Assessing Officer but much larger additions were justified, he could have certainly exercised such powers, of course after putting the assessee to notice. In this context, we may refer to clause (c) of Explanation 1 to sub-section (1) of section 263 of the Act. As is well known sub-section (1) of section 263 of the Act empowers the Principal Commissioner or the Commissioner to call for and examine the record of any proceeding and revise the same if he considers that the order passed therein by the Assessing Officer was erroneous insofar as it is prejudicial to the interest of the Revenue. Clause (c) of Explanation 1 of subsection (1) provides that for removal of doubts it is hereby declared th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petition is disposed of accordingly." 16. On identical facts, Hon'ble Jurisdictional High Court of Gujarat in the case of Nirma Chemicals Works (Pvt) Ltd, 182 Taxmann 183 (Guj) held as follows: "19. Therefore, when the deduction under section 80-I of the Act was granted by the Assessing Officer after disallowing a part of the claim which was carried in appeal before Commissioner (Appeals), the appellate authority was duty bound to examine whether the claim made by the assessee was in accordance with and subject to the provisions of section 80-I of the Act. The requirement of fulfilment of conditions stipulated by sub-section (2) of section 80-I of the Act is, therefore, very much subject-matter of the appeal in relation to the income from warehousing which had been disallowed by the Assessing Officer." 17. Our view is also fortified by the judgment of Hon`ble High Court of Allahabad in the case of Vam Resorts & Hotels Pvt. Limited, 111 taxmann.com 62 (Allahabad) wherein it was held that when an appeal is pending before commissioner (Appeals), exercise of jurisdiction under section 263 by the ld PCIT would be barred. The detailed findings of the Hon`ble Court is reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted." 19. Similar view has been taken by the Bombay High Court in the case of CIT v. Development Credit Bank Ltd., [2011] 196 Taxman 329/[2010] 323 ITR 206 relevant paragraph of the same is extracted below: "Held, dismissing the appeal, that there was no basis or justification for the Commissioner to invoke the provisions of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing satisfied with the explanation of the assessee. This decision of the Income-tax Officer could not be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under Section 263." 22. The Division Bench of this Court in the case of J.P.Srivastava & Sons (Kanpur) Ltd. v. CIT, [1978] 111 ITR 326 (All.) had taken a similar view. The relevant paragraph is extracted hereunder: "We are of opinion that the approach of the Commissioner is erroneous. The failure of the Income-tax Officer to deal with the claim of the assessee in the assessment order may be an error, but an erroneous order by itself is not enough to give jurisdiction to the Commissioner to revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Commissioner of Income Tax exercising power under Section 263 of the Act, as such the Tribunal was correct in limiting its scope to decide whether the exercise of power made by the Commissioner was in consonance with provision of Section 263 and relied upon the decision of Malabar Industrial Co. Ltd. (supra). 25. As, Clause (c) of Explanation 1 to Section 263 of the Act provides that when an appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act by CIT is barred. Thus, in the present case, the CIT wrongly exercised jurisdiction under Section 263 of the Act by remanding back the matter to assessing authority on 25.3.2013, while the appeal was decided by CIT (A) on 5.6.2013. Thus, the order passed by the ITAT does not suffer from any irregularity and needs no interference. 26. As far as the word "record" appearing in Clause (b) of Explanation-1 to Section 263 is concerned, it means the record available at the time of examination by the Commissioner of Income Tax and not any material or record available subsequent to his examination or exercise of power under Section 263. Thus, any order passed by the AO in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled (page 6 of paper book); (v) Show cause notice u/s 263 of the Act (pages 7-8 of paper book) and (vi) reply to above referred notice u/s 263 filed by assessee (pages 9-11 of paper book). Based on the above documents and evidences, ld Counsel pleaded that Assessing Officer made adequate enquiry during the assessment proceedings about the issue raised by ld PCIT. 20. Thus, from the assessee`s facts, it is abundantly clear that during the assessment stage, the Assessing Officer asked the assessee to furnish the details and documents. In response, the assessee submitted reply with evidences before Assessing Officer. Thus, all the documents, details and the explanations required by the Assessing Officer were submitted by the assessee. Just because the Assessing Officer does not bring these documents and details in his assessment order does not mean that assessing officer has not conducted proper enquiry during the assessment stage. In fact, Assessing Officer has applied his mind. The Ld Counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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