9911796707
TMI Blog2023 (7) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 99,209/- of PF and Rs. 30,841/- of ESIC required addition as these payments are not within permitted time" when as a matter of fact, no such addition was warranted either on fact and in law and therefore unsustainable. 2.1 That even otherwise that conclusion that '"the assessee is not eligible for claim beyond due date prescribed under PF Act & ESIC Act to be disallowed u/s 36 of IT Act" is factually incorrect, legally misconceived and wholly untenable. 2.2 That further finding of the learned Principal Commissioner of Income Tax that the issue regards to details of Entertainment tax, EPF, ESCIC, Service Tax and VAT needs to be enquired thoroughly is not based on correct appreciation of facts and in law, apart from being without jurisdiction. 3 That the finding of the learned Principal Commissioner of Income Tax that "the claim of loss on disposed off assets the assessee was not eligible to claim loss on car wherein the block of assets not ceased to exist. The assessee accepts that due to inadvertent errors on the part of the assessee company the value of assets have been taken at Rs. 11,70,034/- instead f Rs. 13,60,034/-. On the claim of loss detailed enquiry was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posited on 11.4.2017 (page 124 of Paper Book) i.e. before due date of furnishing the return of income, therefore no disallowance is warranted. (Reply dated 12.3.2022 at page 80 read with page 124 of Paper Book) 2.2 It is submitted that in respect of aforesaid issue, the appellant vide reply dated 12.3.2022 (pages 77-100 at page 79-80 of Paper Book) filed before learned PCIT has submitted that sum of Rs. 3,48,324/- was duly deposited on 11.4.2017 (page 124 of Paper Book) i.e. before due date of furnishing the return of income; hence no disallowance is warranted. 2.3 It is submitted that finding of learned PCIT at page 8, para 9.2 has held that "the assessee vide reply dated 12.3.2022 submitted that it was assessee's mistake by the Auditor and disallowance of Rs. 3,48,324/- was not required" is misconceived. It is submitted that the contention of the appellant was that "That the VAT liability of Rs. 3,48,324/- which was incurred in the year under review was duly deposited on or before the due date offurnishing of return of income u/s 139(1) of the Act." Hence, no disallowance is warranted u/s 43B of the Act. Thus finding of learned PCIT at page 9, para 10(1) of impugned order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company during the year under review. In this regard, we submit that during the year under review the assessee Company had recorded Rs. 30,841/- of ESIC's employees share & Rs. 99,209/- being PF's employees share. The details ESIC & PF shares is explained as under:- a. PF Contribution (Employees share) During the year under review the assessee Company was running 2 restaurants out of which Delhi restaurant was closed in Nov 2016. The assessee Company during the year under review had recovered PF contribution Employees share of Rs. 99,209/- out of which the company had deposited Rs. 60,557/- for Chandigarh Unit & no amount was deposited for Delhi unit. Details of month wise contribution received from employees & details of deposits are as under:- Name of Liabilities Chandigarh Unit Delhi Unit Employee's Contribution to Provident fund For the Month Amount Date of Deposit For the Month Amount Date of Deposit Apr-16 7314 15-Jul-16 Apr-16 7356 Not deposited May-16 6992 20-Sep-16 May-16 6875 Jun-16 6355 23-Nov-16 Jun-16 5181 Jul-16 5739 01-Dec-16 Jul-16 5015 Aug-16 5647 27-Aug- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is submitted that aforesaid finding of learned PCIT is factually incorrect. It is submitted that as per Column 20(b) of TAR (page 23 of Paper Book) only sum of Rs. 25,925/- (items9 to 16 and item 32 to 40 of said table) of ESI has not been paid by appellantand detail of same was also explained before learned PCIT in tabular chart as under: (Page 83 of Paper Book) Name of Liabilities Chandigarh Unit Delhi Unit Employee's Contribution to ESIC For the Month Amount Date of Deposit For the Month Amount Date of Deposit Apr-16 1726 03-feb-17 Apr-16 1552 Not deposited May-16 1664 22-Mar-17 May-16 1419 Jun-16 1526 22-Mar-17 Jun-16 1020 Jul-16 1376 Not deposited (total of not deposited is Rs. 18,132/-) Jul-16 976 Aug-16 1376 Aug-16 772 Sep-16 1376 Sep-16 982 Oct-16 1314 Oct-16 561 Nov-16 779 Nov-16 511 Dec-16 1190 Dec-16 0 Business Closed Jan-17 3517 Jan-17 0 Feb-17 4089 Feb-17 0 Mar-17 3115 Mar-17 0 Total 23048 7793 4.2 It is submitted that the sum of Rs. 25,925/- has already been disallowed by ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s 36(l)(va) of the Act." 4.4 It is however submitted that in view of aforesaid fact that disallowance has already been made by appellant; there is no prejudice to revenue and infact order is also not erroneous. It is further submitted that even the finding that assessee may claim it in next year on the basis of payment during the year is also misconceived. 5 It is further submitted that finding of learned PCIT (page 9, para 10(3) of impunged order) that "In this way entire amount of Rs. 99,209/- of PF (item 1 to 8 and item 17 to 28 of table at page 23-24 of paper book) and Rs. 30,841/- of ESIC (item 9 to 16 and 29 to 40 of table at page 23-24 of paper book) required addition as these payments are not within permitted time." being employees contribution not deposited by assessee upto due dates of PF Act & ESIC Act in view of applicability of new amendment in section 36 of Act. It is submitted that aforesaid finding are also misconceived in view of judgment of Hon'ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. in ITA No. 983/2018. 5.1 Further reliance is also placed upon following decisions wherein it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 31,53,777/-." 6.3 It is further submitted that appellant during the course of proceedings u/s 263 of the Act in its reply dated 12.3.2022 (pages 77-100 at page 85 - 89 of Paper Book) has submitted as under: "D. No disallowance of loss of sale of fixed assets of Rs. 24.860/- and loss on sale of scrapped/disposed off assets of Rs. 31.28.117/- has been claimed:- In this regard we respectfully submit here that the assessee Company incurred loss on sale of Fixed Assets of Rs. 24,860/- & loss on sale of scrapped/disposed off assets of Rs. 31,28,117/- and the same has been disallowed in the Computation of Income filed for the year under review. That both the above stated amount were disallowed under clause 9e any other allowance under Part A OI-Other Information of ITR form along with bad debts. Details of amount disallowed under clause 9e are as under:- Particulars Amount i Loss on sale of Assets Rs. 24,860/- ii Loss on Scrapped/disposed off assets Rs. 31,23,117/- iii Bad Debt/Amount written off Rs. 32,93,694/- Total Rs. 64,47,471/- The extract of the ITR filed showing the above stated disallowance is being produced below: 9 Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the taxable business loss from the Book loss as per audited financials. The items of additions being contemplated in the notice u/s 263 have already been disallowed in the computation of income and the return filed which was duly provided and considered by the Learned Assessing Officer in faming the assessment order. The disclosures are available in the computation and the income tax return filed with certain disclosures under the column "Any Other Disclosure" under Schedule 01. The contention of notice u/s 263 is that loss on sale of fixed assets of Rs. 24,860/- has been claimed and loss on sale of scrapped/disposed off assets of Rs. 31,28,172/- has been claimed while the balances of these assets still exists in block of assets. We would like to explain this as under:- Loss on sale of assets and assets disposed of details was submitted in reply to point no. 22 vide para no. 12 of our reply submitted on 1st December, 2019 (pages 54 of Paper Book). A detailed annexure showing working of loss on sale and asset scrapping was submitted, which is being provided here in under:- Sr. No. Particulars Sale Value Loss on sale Loss on scrapping a. Gas Breakign Oven 83, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ex- Designing fee, Signboards, Furniture & Fixture etc. - the loss for the above assets of Rs. 31,28,117 has been rightly added in the computation along with the actual loss on assets which were sold. This loss on sale is apparent from the Computation of Income filed and the assessee on its own gave a detailed explanation with working for the losses from sale and scrapping of assets. A detailed working in the form of Annexure was also provided to the Learned Assessing Officer working out the loss on sale and scrapping of asset. The actual sale value of all the assets sold came under the 15% Depreciation bracket rate and the sale amount was thus rightly excluded from the Depreciation chart as per Income Tax Act. There was no realisation from other assets i.e. Furniture/Fixture, Building, Designing charges etc. and thus no sale value was rightly shown under the other assets in the Depreciation Chart as per Income Tax Act. Thus it is evident that the Learned Assessing. Officer had specifically sought details of the loss which were explained in detail, besides the losses incurred have been added back to the Book Loss in Computation of Income/Income tax return filed makes its abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law as held by Hon'ble Delhi High Court in the case of CIT vs. DLF Ltd. reported in 350 ITR 555whereby Hon'ble Court has held as under: "11. In this case, the record reveals that the AO had issued notice, and held proceedings on several dates (of hearing) before proceeding to frame the assessment. He added nearly Rs. 2 crores to the income at that time. The Commissioner took the view that the assessment order disclosed an error, in that the deduction under Section 14-A had not been made. Now, while the statutory direction to the Assessing Officer to calculate, proportionately, the expenditure which an assessee may incur to obtain dividend income, for purposes of disallowance, cannot be lost sight of, equally, such a requirement has to be viewed in the context and circumstances of each given case. In the present case, it was repeatedly emphasized that the assessee's dividend income was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts, in the opinion of this court, were material, and had been given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of assessment proceedings. Therefore, it is evident that the learned officer had conducted proper enquiries before framing the assessment. Infact, the learned Assessing Officer had made all necessary enquiries provided in law and thereafter alone had accepted claims of the assessee. Hence, by no justification, it could be alleged that, the order of assessment framed by the learned officer is erroneous within the meaning of Section 263 of the Act and as such, notice is without jurisdiction. Reliance is also placed on the following judicial pronouncements: i) 295 ITR 282 (SC) CIT v. Max India Ltd. the Hon'ble Apex Court in the above case applied the ratio in the case of Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83 wherein it has been held as under: "A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suomoto 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) 171 ITR 698 (All) CIT v. Goyal Private Family Specific Trust iii) 170 ITR 28 (All) CIT v. KashniNath& Company iv) 171 ITR 141 (MP) CIT v. Ratlam Coal Asn. & Co. v) 430 ITR 55 (Kar) CIT vs. Cyber Park Development & Construction Ltd. vi) ITA No. 2519/Kol/2017 dated 18.4.2018 Garg Brothers (P) Ltd. vs. DCIT vi) ITA Nos. 3281-3284/D/2015 dated 11.10.2019 Smt. ShumanaSen vs. DCIT vii) ITA No. 5239/D/2019 dated 21.2.2020 M/s Sunrays Cotspin (P) Ltd. vs. PCIT viii) ITA No. 3207/Ahd/2009 Gujarat Laxmi Majur Kamgar Sahkari Mandi Ltd. vs. CIT ix) ITA No. 499/Chd/2016 dated 9.11.2016 Sh. Paramjit Singh vs. PCIT 7.3 Moreover, it is submitted, in any case, it is not a case where conditions for exercise of power u/s 263 of the Act stand satisfied since at best it is a case, where two view are possible (one view of the learned Assessing Officer and other of the learned PCIT who issued the notice and passed order u/s 263 of the Act). It is submitted that order of assessment dated 10.12.2019is not erroneous in as much as prejudicial to interest of revenue since it is not based on; - Either incorrect application of law; or - Incorrect application of fact; or - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open." [Emphasis supplied] 8.4 Further in the case of ITO vs. D.G. Housing Projects Ltd. reported in 343 ITR 329to has held that in cases of wrong opinion or wrongfinding on merits, the CIT has to come to the 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. It was held as under: "19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the PCIT to justify the exercise of jurisdiction under Section 263 of the Act. In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by the Assessee out of its own funds during the AY in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the PCIT. 13. Therefore, the Court is of the view that the ITAT was not in error in setting aside the impugned order of the PCIT under Section 263 of the Act. No substantial question of law arises." [Emphasis supplied] 9 THAT SECTION 263 OF THE ACT CANNOT BE INVOKED TO MAKE DEEPER ENQUIRY: It is submitted that Hon'ble High Court of Delhi in the case of CIT vs. Leisure Wear Exports Ltd. reported in 341 ITR 166 has held that where the assessment order has been passed by the Assessing Officer after taking into account the assessee's submissions and documents furnished by him and no material wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with law. Reliance is placed on the judgment of Hon'ble Delhi High Court in the case of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8 wherein it has been held as under: "10. For the purposes of exercising jurisdiction under Section 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that "in the case of the Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue". 11. In the considered view of the Court, this can hardly constitute the reasons required to be given by the PCIT to justify the exercise of jurisdiction under Section 263 of the Act. In the context of the present case if, as urged by the Revenue, the Assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence under Section 263 of the Act, is not permissible. 10.4 Reliance is also placed on the following judgments i) ITA No. 3205/Del/2017 M/s Amira Pure Foods (P) Ltd. v. PCIT ii) ITA no. 574/Del/2018 dated 19.06.2018 M/s VidyaPrakashanMandir (P) Ltd. Vs Pr CIT iii) ITA No. 2539/Del/2018 dated 29.08.2018 Durgesh Autofin P Ltd vs Pr CIT 11. EXPLANATION 2 TO SECTION 263 OF THE ACT DOES NOT AUTHORISE OR GIVE UNFETTERED POWER TO COMMISSIONER TO REVISE EACH AND EVERY ORDER AND, IS NOT A SUBSTITUTE TO THE PRECONDITION U/S 263(1) OF THE ACT. 11.1 The Hon'ble Mumbai Tribunal in the case of Narayan TatuRane vs. ITO reported in 70 taxmann.com 227has also held that in a case where learned PCIT has not brought any material on record by making enquiries or verifications to substantiate his inference, the learned PCIT is not justified in holding that the impugned assessment order was erroneous. The relevant extract is as under: "21. In the instant case, as noticed earlier, the AO has accepted the explanations of the assessee, since there is no fool proof evidence to link the assessee with the document and M/s RNS Infrastructure Ltd, from whose hands it was seized, also did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3498/ Mum/2017 dated 02.01.2018, Shri Anil L. Todarwal. vii) ITA No. 1007/D/2019 dated 25.9.2019 Rekha Gupta v. Pr. CIT viii) ITA No. 456/D/2021 dated 4.4.2022 NarendraAggarwal vs. PCIT "25. As far as the invocation of Explanation 2 to Section 263 by PCIT in the present case is concerned, we are of the view that only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. 12 APART THEREOF APPELLANT SEEKS TO RELY UPON FOLLOWING PROPOSITION IN RESPECT OF SECTION 263 OF THE ACT 12.1 It is thus submitted that, without bringing any evidence to the contrary, the Learned PCIT, erred in holding the order to be erroneous and directing the Assessing Officer to re-examine the issue. The proposition relied upon by the Appellant are as under: PROPOSITION I: THAT IT IS NECESSARY FOR COMMISISONER OF INCOME TAX TO POINT OUT THE MATERIAL ON RECORD AS TO HOW THE ORDER OF AO IS PREJUDICIAL TO THE INTEREST OF REVENUE i) 142 ITR 778 (Pat) CIT vs. Shanti LalAggarwala ii) 96 ITR 310 (All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied. It is submitted that there must be positive material for the Commissioner to consider objectively and not subjectively that the order of the Assessing Officer was erroneous, in so far as it was prejudicial to the interest of revenue. The Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd., reported in 203 ITR 108 has held that there must be some prima facie material on record to show that the tax which was lawfully eligible has not been imposed or that by application of the relevant statute on an incorrect or an incomplete interpretation, a lesser tax than what was just, has been imposed. It is submitted on an application of the aforesaid rule, it will be seen that the order made u/s 263 of the Act was entirely without any jurisdiction as there was absolutely no material to justify such an assumption nor has any material been brought on record or the materials which are on record have been disputed justifying such an assumption that the tax lawfully eligible has not been imposed. 14. It is therefore prayed that, impugned order made under section 263 of the Act dated 24.3.2022 be held to be without jurisdiction and, therefore be quashed and appeal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Ld. Pr. CIT did not verify the facts from records and he failed to appreciate the same in right perspective. 7. The law is well settled. The powers u/s 263 can be exercised if the order sought to be revised is erroneous inasmuch as prejudicial to the interests of the Revenue. Hence twin conditions are required to be satisfied - one being that order should be erroneous and second, such order should be prejudicial to the interests of the Revenue. The basis of exercising the power by the learned Pr. CIT is that the AO failed to verify the correctness of the disallowance made in the tax audit report. However, during the course of hearing the learned counsel for the assessee has pointed that the learned Pr. CIT failed to consider the fact that no disallowance could be made in the case of VAT as the amount was duly deposited before the due date of filing of the return of income. Further, in respect of EPF contribution, it was pointed out that the assessee itself had made disallowance, hence no prejudice was caused to the Revenue. 8. The learned DR could not rebut the submissions of the assessee regarding VAT, paid in the government account before the due date of filing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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