TMI Blog2023 (7) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee it is manifest that the assessee has given all these details and explanation as sought by the AO in the show cause notice issued u/s 142(1) of the Act. The AO even issued a second show cause notice dated 22.12.2019 asking the details regarding unsecured loans along with explanation in respect of disallowance u/s 14A r.w. Rule 8D. Finally the AO has made disallowance only u/s 14A and no disallowance or addition was made in respect of the other issues as raised in the show cause notice issued u/s 142(1) of the Act. Thus, it is clear that the AO has conducted an inquiry on these issues and was satisfied with the reply and explanation filed by the assessee along with supporting evidence. Hence it is not a case of complete lack of inquiry on the part of the AO while passing the assessment order and therefore, the assessment order cannot be held to be erroneous so far as the prejudicial to the interest of the revenue on the ground of lack of inquiry. Though the commissioner has jurisdiction to invoke the provision of section 263 even when the AO has conducted inquiry and taken a view but the said jurisdiction and power of commissioner is restricted only in the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specific reasons of consumption of electricity in development of site in the remote rural area as well as the expenditure incurred on acquiring equipment of machinery require for carrying out construction work. All these details were available with the AO as filed by the assessee, therefore, this case is certainly does not fall in the category of lack of inquiry on the part of the Assessing Officer. Once AO has conducted an inquiry which may be inadequate inquiry but in that case it cannot be said that the order passed by the AO is erroneous due to complete lack of inquiry. Once the AO has conducted an inquiry and taken a view which is not found to be impermissible view then the Pr. CIT is not permitted to invoke the provision of section 263 of the Act merely because he does not agree with the view of the AO. Therefore, once the AO was satisfied with the supporting evidence produced by the assessee in response to the show cause notice u/s 142(1) then it is not necessary for the AO to give an elaborate finding on the issue. Accordingly, in the facts and circumstances of the case when the AO has conducted an inquiry then the Pr. CIT while passing the revision order cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was also added back to the total income by the assessee itself. Thereafter, the Pr. CIT on examination of the assessment record noticed certain discrepancies and issued show cause notice u/s 263 of the Act dated 25.02.2022. In the show cause notice Pr. CIT has pointed out various items of claim on which the AO allegedly did not conduct any inquiry while passing the assessment order. In response to the show cause notice the assessee filed written submissions and explained the issues raised in the show cause notice. However, the Pr. CIT was not satisfied with the reply/explanation of the assessee and consequently he set aside the assessment order passed u/s 143(3) by holding the same as erroneous so far as the prejudicial to the interest of revenue for want of inquiry conducted by the AO. The Pr. CIT asked the AO to frame the assessment de-novo with the direction to examine the issues specified in the revision order. Aggrieved by the impugned order passed by the Pr. CIT the assessee filed the present appeal. 3. Before the Tribunal the Ld. AR of the assessee has submitted that the first issue raised by the Pr. CIT in the show cause notice is regarding the discrepancy in the recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly asked all the relevant details regarding the receipts declared by the assessee for assessment years 2014-15 as well as 2015-16. The Assessing Officer has also examined the identical issue while framing assessment u/s 143(3) for those assessment years. The copies of the assessment orders passed u/s 143(3) for A.Y.2014-15 placed at page No. 51 of the paper book and for assessment year 2015-16 is placed at page No. 55 of the paper book. He has also referred to the reply filed by the assessee to the queries raised by the AO along with notice u/s 142(1) dated 31.10.2019 and submitted that the assessee furnished all the relevant details along with bills raised by the assessee to the contractee PATH (India). Thus, Ld. AR has submitted that once the assessee has duly explained the difference in the receipts declared in the books of account in comparison to the receipts appearing in form 26AS and also reconciled the difference before the AO and Assessing Officer has passed the scrutiny assessment only after he was satisfied with the explanation of the assessee as this issue is recurring issue for last several assessment years then the Pr. CIT is not justified in invoking the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons for higher percentage of expenditure to the turnover for the year under consideration in its reply placed at page No. 127 to 129. Ld. AR has submitted that during the year under consideration site was under development for construction of civil road in Dhar District and to facilitate such road development, the assessee has taken a temporary electricity connection at village Khichipura and therefore, during the year under consideration there is a huge electricity expenses in comparison to the preceding year. The assessee produced all the details of the electricity expenses along with electricity bills and therefore, the genuineness of the expenditure cannot be questioned. The AO after verification of these details was satisfied with the claim of these expenses. Hence the Ld. AR has contended that once the AO has conducted an inquiry and also verified the details, accounts and bills of the expenditure then the order of the AO cannot be held as erroneous for want of inquiry. 7. As regards the food and refreshment expenses of Rs. 3113,391/- the assessee produced all the details with supporting evidence before the AO as well as before the Pr. CIT for verification, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e physical form but due to paucity of time as the limitation was gone to expire on 31.03.2022 the Pr. CIT passed the impugned order without considering the explanation and replied filed by the assessee whereby the assessment order was set aside and matter was remanded for de novo assessment. Therefore, at the outset it appears to be a case of violation of principal of natural justice. The issue taken up by the Pr. CIT in the show cause notice are reproduced in the impugned order in para 2 as under: 2. Subsequent to the assessment, assessment records were examined and certain discrepancies were noticed. Accordingly a detailed show cause notice was issued by the undersigned on 25.02.2022 mentioning as under 01. On perusal of the relevant case records, it is observed that the return of income in the case of the assessee for AY 2017-18 was filed on 29.10.2017 declaring total income of Rs. 74,73,400/- The case was selected for complete scrutiny. In the case of the assessee notice u/s 143(2) was issued on 23.08.2018 and notice u/s 142(1) was issued on 31.10.2019 02. In response, replies were filed by the assessee and after considering the submissions made the assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was claimed during the preceding year, Rs. 2,63,53,247/- was claimed as Food Refreshment expenses which is four times of amount which was claimed during the previous year. During the assessment proceedings the assessing officer has not examined that whether exorbitant increase in these expenses are justified and genuine or not. 03.4 On further perusal of the P L account of the assessee company, it was noticed that the assessee had debited Rs. 5,94,59,303/- under the head Changes in inventories of finished goods, work-in-progress and Stock-in- trade During the course of assessment proceedings neither the assessee has furnished explanation nor the assessing officer has sought any explanation as to why this amount had been debited in P L account. Therefore, the assessment order passed by the AO is erroneous in the sense that it is prejudicial to the interest of revenue. 4. For the reasons stated hereinabove, the order u/s 143(3) dated 26.12.2019 passed by the Assessing Officer in your case for the A. Y. 2017-18 appears to be erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, by virtue of the power vested in the undersigned as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, for the sake of brevity we are not reproduced the reply and documents filed by the assessee before the AO. However, on-going through the reply filed by the assessee it is manifest that the assessee has given all these details and explanation as sought by the AO in the show cause notice issued u/s 142(1) of the Act. The AO even issued a second show cause notice dated 22.12.2019 asking the details regarding unsecured loans along with explanation in respect of disallowance u/s 14A r.w. Rule 8D. Finally the AO has made disallowance only u/s 14A and no disallowance or addition was made in respect of the other issues as raised in the show cause notice issued u/s 142(1) of the Act. Thus, it is clear that the AO has conducted an inquiry on these issues and was satisfied with the reply and explanation filed by the assessee along with supporting evidence. Hence it is not a case of complete lack of inquiry on the part of the AO while passing the assessment order and therefore, the assessment order cannot be held to be erroneous so far as the prejudicial to the interest of the revenue on the ground of lack of inquiry. Though the commissioner has jurisdiction to invoke the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant record then the AO was not expected to give an elaborate finding on this issue. Similarly on the other issues when the AO has issued show cause notice and the assessee produced relevant details and supporting evidence in respect of the expenses incurred which were subjected to TDS wherever applicable and the extra expenditure was incurred for the year was specifically explained by the assessee giving the specific reasons of consumption of electricity in development of site in the remote rural area as well as the expenditure incurred on acquiring equipment of machinery require for carrying out construction work. All these details were available with the AO as filed by the assessee, therefore, this case is certainly does not fall in the category of lack of inquiry on the part of the Assessing Officer. Coordinate Bench of this Tribunal in case of Rakesh Khandelwal vs. Pr. CIT (Supra) while considering an identical issue has held as under: 8. Therefore, it is not the case where there was no enquiry at all by the A.O. The assessee had furnished certain evidences, which the assessing officer has gone through. There is no dispute that the Ld. Principal CIT can exercise the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish and show the error or mistake made by the A.O. 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 A.O. 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 A.O. who conduct further enquiries without a finding that the order is erroneous finding that order is erroneous the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the A.O. would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the A.O. to decide the aspect/question. The Hon'ble Court further held that this distinction must be kept in mind by the CIT while exercising jurisdiction u/s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once the AO has conducted an inquiry and taken a view which is not found to be impermissible view then the Pr. CIT is not permitted to invoke the provision of section 263 of the Act merely because he does not agree with the view of the AO. Similar view has been taken by the Jaipur Bench of the Tribunal in case of Smt. Lata Phulwani vs. Pr. CIT (supra) as under: 5. We have considered the rival submissions as well as the relevant material on record. We have carefully perused the assessment order passed by the AO under section 143(3), show cause notice issued by the ld. PCIT under section 263 of the Act as well as the impugned order passed under section 263. It is manifest from the record that the case of the assessee was taken up for limited scrutiny as per the notice issued under section 143(2) dated 19.09.2016, the relevant part of the said notice listing the issues identified for examination are as under :- This is for your kind information that the return of income for Assessment Year 2015-16 filed vide ack. No. 134831180300316 on 30/03/2016 has been selected for Scrutiny. Following issues have been identified for examination :- i. Purchase of Property i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in elaborate manner, but once he was satisfied with the supporting evidences produced by the assessee he has accepted the claim. The ld. PCIT has invoked the provisions of section 263 by issuing the show cause notice dated 4th February, 2019 at pages 16 17 of the paper book as under :- Xxxxxxxxxxxxx Thus it is clear from the show cause notice issued under section 263 that the ld. PCIT has invoked the provisions of section 263 only on the issue of allowability of deduction under section 54F in respect of the investment made by the assessee towards cost of agricultural land and construction of house. The sole ground for initiating the proceedings under section 263 by the ld. PCIT is that in his view the claim of deduction in respect of agricultural land is not admissible. As apparent from the show cause notice that the scope of proceedings under section 263 was limited ITA No. 246/JP/2020 Smt. Lata Phulwani, Jaipur. only on the issue of allowability of deduction under section 54F in respect of the agricultural land acquired by the assessee and used for construction of house. There was no allegation by the ld. PCIT about the lack of enquiry on the part of the AO wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. PCIT has turned down the contentions of the assessee and has gone further to verify the facts by conducting an enquiry. This exercise of the ld. PCIT in conducting the enquiry to find the facts is beyond the scope of the proceedings initiated under section 263 by issuing the show cause notice dated 4th February, 2019. In the said show cause notice, the ld. PCIT has raised only one issue i.e. purely a view regarding the allowability of the deduction under section 54F in respect of the investment made for construction of house on agricultural land. Whereas in the proceedings under section 263 the ld. PCIT has travelled beyond the scope of proceedings as initiated vide show cause notice dated 4th February, 2019. Therefore, the proceedings which are beyond the scope of the revisional proceedings, are not permissible as not an issue involved in the show cause notice. 6. Further, once it is not a case of lack of enquiry or inadequate enquiry as per the show cause notice issued under section 263 of the Act, then conducting a further enquiry on the factual aspects of the investment made in purchase of agricultural land and construction of the house is beyond the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings; on 16-10- 1995, the Assessing Officer required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, which the Assessing Officer desired to enquire into. The assessee has produced desired information by 15-11-1995. There-after, the case was adjourned to 22-11-1996 and 1-12-1995. On 5-12-1995, the Assessing Officer studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid and the case was adjourned to 19-1- 1996. On 19-1-1996, the Assessing Officer again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adjourned for 23-1-1996. On 23-1-1996, the case was discussed and finalised. After that, assessment was completed by passing assessment order. These matters clearly indicate that the Assessing Officer particularly made reference to the matters, which the CIT has opined were not inquired. Thus, ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable. Consequently, the appeal fails and is hereby dismissed. Thus the Hon'ble High Court has held that the ld. CIT can cancel the order of the AO and require the concerned AO to pass a fresh order in accordance with the law after holding a detailed enquiry. But when the enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has relied upon various decisions and further the assessee has also relied upon the recent decision of the Coordinate Bench of this Tribunal in case of Shri Rajendra Kumar Sharma vs. JCIT in ITA No. 358/JP/2015 wherein the Tribunal has held in paras 4 5 as under :- 4. We have heard and considered the rival contentions and perused the material placed on record. From the record, we found that the assessee claimed deduction of Rs. 83,54,434/- u/s 54F from the LTCG declared by it. The assessee made investment of Rs. 1,15,00,000/- in purchase of land and constructed residential house thereon. The area of land was 4090 Sq.mt. and construction thereon is of 1504 Sq. ft. The A.O. on these facts issued a show cause notice to assessee as given in assessment order to which assessee replied which is given in page -- 6 of assessment order. The A.O. on following grounds denied the claim of assessee: (a) The land is agricultural and not residential. (b) The construction of residential house without approval of plan by Govt. Authority. (c) The assessee has also not submitted any electricity and water connection evidence. (d) The land was registered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections. There is no need of approval of plan from competent authorities if construction is within limits on agricultural land and it is not a condition laid down in Section 54F for construction of residential house. The construction on land is meant for residential house. The assessee could complete the construction of the residential house within three years and if any facility lacking in the constructed residential house the same could be completed within in that period. There is water supply from well and temporary electric connection in the residential house constructed by assessee. The construction of residential house is 1553.50 Sq.ft. and not having proper bills for construction cannot be taken adversely against him for purposes of Section 54F. These facts are evident from the valuation report of Regd. Valuer a copy of which is submitted. The Inspector of department furnished vague details without any physical inspection of building and took only photographs. The assessee has only to invest net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 263 merely because he does not agree with the view of the AO. Hence in the facts and circumstances of the case as well as the foregoing discussion about the settled principles of law laid down in various decisions, we hold that the impugned order passed by the ld. PCIT is not sustainable and the same is liable to be set aside. 13. Therefore, once the AO was satisfied with the supporting evidence produced by the assessee in response to the show cause notice u/s 142(1) then it is not necessary for the AO to give an elaborate finding on the issue. Accordingly, in the facts and circumstances of the case when the AO has conducted an inquiry then the Pr. CIT while passing the revision order cannot remand the matter back to the AO for passing afresh order simply because of the reason that the Pr. CIT himself was not sure about the correctness of the claim of the assessee. Therefore, once the order passed by the AO is not erroneous for want of inquiry then it is incumbent upon Pr. CIT to give conclusive finding that the order passed by the AO is not sustainable in law. Accordingly in the facts and circumstances of the case and following the various judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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