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TMI Blog2024 (11) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... ue for the following reasons :- "2. On perusal of assessment order dated 23.11.2018, the assessment order was believed to be erroneous and prejudicial to the interest of revenue as per observations given hereunder: i. Large increase in Sundry creditors and reduction in business income as compared to preceding year : During the assessment proceedings, this issue was raised by the then A.O. However, the genuineness and creditworthiness of the sundry creditors was not verified at the time of assessment proceedings. No proper examination was made to identify the veracity of showing large increase in sundry creditors. ii. Gross total income is less than the value of foreign remittance sent : During the assessment proceedings, this issue was raised by the then A.O. However, the aspect of withholding of taxes and reporting of such remittance was not examined rendering the issue unverified. iii. Large business loss set off against other heads of income: The assessee company has declared income of Rs. 54,93,70,062/- under the head Capital Gain and Rs. 1,14,84,307/- under the head "Income from other sources" and set-off the same against current year's business loss of Rs. 88,57,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Income, the assessee company has deducted profit on sale of land treated under capital gain of Rs. 4,63,79,0271- whereas the same is not appearing in the P&L Account. This issue has not been examined by the then AO. ix. As per Annexure XVI of the Tax Audit Report-Payment of Rs. 29,22,13,920/- has been made to Non Resident Indian u/s 195 of the Income-tax Act, 1961 on which TDS of Rs. 3,05,59,077/- @ 10.45% has been deducted. However, the purpose for which this payment was made to NRI has not been called for and examined during the assessment proceedings. x. As per XIX of the Form 3CD-Turnover and Net Profit has been shown as Nil for current year as well as for preceding year thereby making the Tax Audit Report defective as per Section 139(9) of the Income-tax Act, 1961. xi. As per Form 3CD- Stamp value of Kolkata property is shown at Rs. 130,90,91,035/- as against the sale consideration of Rs. 80,61,00,0001-. Further, as per reply dated 04.09.2018 - Form No. 26QB/26AS - TDS deducted is only at Rs. 80,61,000/-. However, the AO did not verify whether TDS is deductible on Rs. 130,90,91,035 or on Rs. 80,61,00,000/-. In addition to the same, the cost price of the Kolkata pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961. ('Act'), setting aside the order passed by the learned Assistant Commissioner of Income Tax, Circle 3(2), Delhi (' AO') and directing him to make a fresh assessment de-novo. Each of the ground is referred to separately, which may kindly be considered independent of each other. 1. Ground No.1 1.1 On the facts and in circumstances of the case and in law, the learned PCIT has erred in passing the revision order in haste without giving fair and proper opportunity of being heard and without following the principles and rules of natural justice. 2. Ground No. 2 2.1 On the facts and in circumstances of the case and in law, the order passed by the learned PCIT under section 263 of the Act setting aside the assessment framed under section 143(3) of the Act as erroneous and prejudicial to the interests of the revenue is bad in law and void-ab-initio. 2.2 On the facts and circumstances of the case and in law, the learned PCIT failed to appreciate that the Appellant has disclosed fully and truly all the material facts necessary for the assessment and that the original assessment was made by the then learned AO under section 143(3) of the Act after due and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Point-L) 3 Large business loss set off against other heads of income The correctness of Assessee Company's claim of income from capital gain and other sources was not verified and examined properly during the course of assessment proceedings. Notice dt. 16.08.2018 (Pg.no.24, CASS Reason - h) (Pg.no.26, Query - 14) Reply dt. 04.09.2018 (Pg.no.36, Point-h) and Reply dt. 15.10.2018 (Pg.no.43, Q.no.14) 4 Large cash payments made for credit card purchases (AIR 002) Information was not provided and the assessment proceedings were concluded without examining this issue. Notice dt. 16.08.2018 (Pg.no.24, CASS Reason-n) Reply dt. 04.09.2018 (Pg.no.37, Point-n) 5 Low income from TCS receipts - Liquor (TCS and profit in Part BTI/Part A-P&L of ITR) This issue has not been examined in details by the then Assessing Officer at the time of assessment proceedings. Notice dt. 16.08.2018 (Pg.no.24, CASS Reason - j) Reply dt. 04.09.2018 (Pg.no.36, Point-j) 6 Deduction u/s 43B of the Income-tax Act, 1961 of earlier years amounting to Rs. 34,67,86,614/- Correctness not verified by the then AO at the time of assessment proceedings. Notice dt. 16.08.2018 (Pg.no.24, Query - 5) Reply dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7 was deleted by the AO after due verification. Therefore, the observations made by ld. PCIT in revision proceedings are mere observations and it is not proved that it is prejudicial to the interest of Revenue. He submitted that all the issues were duly verified by the AO during assessment proceedings. Therefore, revision proceedings are void ab initio. In this regard, he relied on the decisions of Hon'ble Delhi High Court in the case of PCIT vs. Clix Finance India (P.) Ltd. (2024) 160 taxmann.com 357 (Delhi) and CIT vs. Sunbeam Auto Ltd. (2010) 189 Taxman 436 (Delhi). 7. On the other hand, ld. DR for the Revenue brought to our notice page 2 of the assessment order wherein criteria for selection of case under CASS was reproduced and the AO has not verified all the issues which were necessary for selection of the case under CASS. Since AO has not verified as per the mandate, the order passed by the AO is falling within the ambit of Explanation 2 to section 263 of the Act and he relied on the findings of ld. PCIT. 8. Considered the rival submissions and material placed on record. We observed from the detailed submissions and chart submitted by the assessee that ld. PCIT has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 22. Reliance can be placed on the decision of this Court in the case of CIT v. Sunbeam Auto Ltd. [2009 SCC OnLine Del 4237], wherein, it was held that if the AO has not provided detailed reasons with respect to each and every item of deduction etc. in the assessment order, that by itself would not reflect a non-application of mind by the AO. It was further held that merely inadequacy of enquiry would not confer the power of revision under Section 263 of the Act on the Commissioner. The relevant paragraph of the said decision reads as under:- "17. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the matter." No substantial question of law arises for our consideration." 24. In Ashish Rajpal as well, this Court was of the view that the fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee. 25. Further, the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd., enunciates the meaning and intent of the phrase "prejudicial to the interests of the Revenue", in the following words:- "8. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [(1957) 31 ITR 872 (Cal)], the High Court of Karnataka in CIT v. T. Narayana Pai [(1975) 98 ITR 422 (Kant)], the High Court of Bombay in CIT v. Gabriel India Ltd. [(1993) 203 ITR 108 (Bom)] and the High Court of Gujarat in CIT v. Minalben S. Parikh [(1995) 215 ITR 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as discussed the sanctity of twofold conditions for the purpose of invoking jurisdiction under Section 263 of the Act. The relevant paragraph of the said decision reads as under:- "27. Learned counsel appearing on behalf of the assessee has heavily relied upon the decision of this Court in the case of Malabar Industrial Co. Ltd. (supra). It is true that in the said decision and on interpretation of Section 263 of the Income Tax Act, it is observed and held that in order to exercise the jurisdiction under Section 263(1) of the Income tax Act, 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. It is further observed that if one of them is absent, recourse cannot be had to Section 263(1) of the Act. ***" 27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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