TMI Blog2023 (6) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... AO framed u/s 143(3) of the Act. Decided in favour of assessee. - ITA No. 441/DEL/2021 - - - Dated:- 16-11-2022 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KUL BHARAT, JUDICIAL MEMBER For the Assessee : Dr. Rakesh Gupta, Adv For the Department : Shri M. Baranwal, CIT-DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 30.03.2021 framed by the PCIT 7, Delhi u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. 2. The sum and substance of the grievance of the assessee is that the PCIT erred in law and on facts in assuming jurisdiction u/s 263 of the Act and further erred in holding the assessment order dated 14.12.2017 as erroneous and prejudicial to the interest of the Revenue. 3. The representatives of both the sides were heard at length, the case records carefully perused. Relevant documentary evidences brought on record duly considered in light of Rule 18(6) of ITAT Rules. 4. The root cause of quarrel lies in the assessment order framed u/s 143(3) of the Act, which was basis for the ld. PCIT for assuming jurisdiction u/s 263 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally in Room no. 397, C.R. Building, I.P. Estate, New Delhi at 11:30 A.M. Please note that if no explanation is received upto the appointed date, it will be presumed that you have no objection to proposed action u/s 263 of the Income Tax Act, 1961. 6. The ld. PCIT was of the firm belief that since the assessee has made cash payments as mentioned in his notice, thereby violating the provisions of section 40A(3) of the Act, which was not at all examined by the Assessing Officer, making the assessment order erroneous as well as prejudicial to the interest of the Revenue. 7. Referring to various judicial decisions, the ld. PCIT, at Para 11 of his order, held that the assessment order passed by the Assessing Officer without making enquiries or verification, which should have been made, and hence the assessment order is erroneous. Had the enquiries been conducted, it would have made a tax implication in this case and, therefore, the order is prejudicial to the interest of the Revenue. Accordingly, the assessment order was set aside with a direction to verify the information of cash payment, and after verification, pass a consequential order. 8. We have given thoughtful consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jective of the provisions. 4. So far as payments made to the railways on account of freight charges or for booking of wagons, and payment of sales tax, excise duty, are concerned, clause (b) of rule 6DD specifically exempts such payments from the purview of section 40A(3) if, under the rules framed by the Government, these are required to be made in legal tender. 10. A perusal of the aforementioned Circular clearly shows that the provisions of section 40A(3) of the Act will not apply to repayment of loans or payment towards the purchase price of capital assets such as, plant and machinery not for resale. 11. In light of the aforementioned Circular, though the ld. PCIT in his order mentioned that he has perused the record, ledger account filed during the assessment proceedings, but had he appreciated this ledger account in true perspective, he would have come to know that all the payments have been made for purchase of capital assets on which subsequently, depreciation was claimed as is evident from the depreciation chart. 12. It would be pertinent to refer to the observations of the Hon'ble High Court of Delhi in the case of DG Housing Project 343 ITR 329 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:- These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. 15. The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the Assessing Officer had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or verification. These cases have to be distinguished from other cases (i) where there is enquiry but the findings are incorrect/erroneous; and (ii) where there is failure to make proper or full verification or enquiry. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well- accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10) . . . From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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