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TMI Blog2023 (7) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2021 for A.Y.2016-17 by PCIT, Ahmedabad-3, A'bad directing the AO to review the allowability of Director's remuneration is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. PCIT has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant. 2.1 The Ld. PCIT has grievously erred in law and on facts in initiating the proceedings u/s 263. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. PCIT ought not to have held that the AO has passed erroneous or prejudicial assessment order as enumerated in Section 263. It is, therefore, prayed that the order passed u/s 263 by PCIT may please be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 263 of the Act. Before us, the counsel for the assessee submitted that a perusal of the assessment order shows that details of all the remunerations paid by the assessee to related parties under section 40A(2)(b) of the Act were examined by the AO during the course of assessment proceedings. After detailed enquiry on this aspect, the AO on analysis of the facts of the case made a disallowance in the case of one of the directors, Shri Thakkar. It is not a case where inadequate enquiries or no enquiries were made by the AO, but it is a case where vide the aforesaid 263 proceedings, the Principal CIT is seeking to supplant his own view against the view taken by the AO in the assessment proceedings. Accordingly, it was submitted that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance was made in respect of one of the directors, by restricting the remuneration to Rs. 5 lakhs only, then in such case similar disallowance was also called for in case of another director as well. We observe that in this case, the AO had asked the assessee vide notice dated 22-12-2018 to justify the claim of remuneration expenditure amounting to Rs. 44 lakhs and in response to the same, assessee filed detailed explanation vide letter dated 24-12-2018, in which he explained the claim of remuneration paid to the directors. Accordingly, the AO took a well-informed decision after considering the submissions on this issue placed on record by the assessee during assessment proceedings. 7.1. Regarding the scope of proceedings u/s 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distinction 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. --- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visuali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'." 7.3 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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