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TMI Blog2025 (1) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the PCIT erred in setting aside the assessment on the following issues: (a) verification for loans taken (INR130 crores) qua requirement of section 68 of the Act; (b) examination of TDS compliances with respect to foreign remittances of INR 64,61,882; (c) verification of higher claim of depreciation under sections 32 and 32AC of the Act; (d) examination of allowability of custom duty paid under protest and claimed as expenditure; (e) examination of deductibility of the following claims: (i) stock obsolesce claim, (ii) debtors written off against the provision for doubtful debts, and (iii) provision for doubtful debts recovered back; (f) examination of disallowance. under section 14A, which had been duly examined and verified by the assessing officer in the course of assessment, without pointing out satisfaction of the jurisdictional conditions, namely, that the assessment order passed is erroneous and prejudicial to the interest of the Revenue to the extent of acceptance/ allowance of the claims. 3. On the facts and circumstances of the case and in law, the PCIT erred in law in setting aside the assessment on the issues mentioned therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 92CA(4) of the Act addition of Rs. 35,24,63,309/- on substantive basis and addition of Rs. 1,277,840,734/-" on protective basis has been proposed to be made to the assessee's total income. 3. Aggrieved, against the draft assessment order the assessee filed Objections before the learned Dispute Resolution Panel(DRP)- 1, Delhi. The learned DRP vide their directions dated 15.02.2022 under section 144C(5) of the Act upheld the adjustments made by the TPO. Pursuant to the directions of learned DRP the Assessing Officer vide impugned assessment order dated 30.03.2022 made addition of Rs. 35,24,63,309/- on account of upward adjustments of ALP u/s 92CA to the income returned by the assessee. 4. According to the learned PCIT the order of Assessing Officer was erroneous in so far as it was prejudicial to the interests of revenue. He, therefore, initiated proceedings u/s 263 of the Act by issuing show cause notice u/s 263 of the Act on 24.11.2023. 5. After considering the submissions advanced on behalf of the assessee, the learned PCIT vide impugned order dated 30.03.2024 u/s 263 of the Act set aside the following matters to the file of AO, inter alia, by observing as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO despite being part of the issues on the basis of which the case was taken up in scrutiny. The AO is directed to call for complete details of these items and verify and examine their genuineness and examine the fairness and genuineness of criteria of their quantification in the light of necessary documents including entries in the books of accounts. The claims may/may not be allowed accordingly. 6. The computation of income, AO has erroneously taken the loss as per the revised ITR at Rs. 40,29,85, 156/-. However, it is seen that the loss is computed at Rs. 10,12,47,402/- crores after making some prima-facie adjustments in order passed u/s 143(1) of the Act. The AO ought to have taken the loss as per the intimation dated 09.07.2019. The AO is directed to adopt the computed income u/s 143(1) at (-)Rs. 10,12,47,402/- 7. Issue of applicability of section 14A disallowance may be inquired and verified by the assessing officer. 8. The deduction of Rs47,57,07,831/- consisting of Rs. 1,42,34,651/- towards Debtors written off against Provision for doubtful debts, Rs 3,56,33,929/- towards Provision for doubtful debt amounts recovered back, Rs. 2,48,30,660/- towards provision for stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting entity having sales of INR 14,300 crores approx during the calendar year 2017 and retained earnings as on January 01, 2017 is INR 2,383 crores approx while the bank balance was INR 79 crores approx. as on December 31, 2017. In this regard he referred the order passed by the Hon'ble Delhi High Court in the case of PCIT v. Azure Retreat (P) Ltd. (158 taxmann.com 169) in which it has been held that where documents had been furnished to establish identity and creditworthiness of lender and genuineness of transaction, addition cannot be made under section 68 of the Act and in this regard learned PCIT has failed to point out how the provisions of section 68 of the Act are applicable. He further submitted that since the disallowance under section 94B of the Act was surrendered suo motu by the assessee and which has been added in the taxable income of the assessee in the completed assessment, there is no error causing prejudice to the interest of the Revenue in the assessment order requiring revision thereof. Referring to page 94 of the paper book, he submitted that this fact was explicitly submitted before the Ld. PCIT in response to a question during the course of proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To buttress his contention learned AR relied on the ratio of decisions of Hon'ble Supreme Court in CIT v. United Glass MGF Co. Ltd. (SLP no. 30146 of 2008); and Hon'ble Delhi High Court in the case of CIT v. Samtel Color Ltd. [2009] 184 Taxman 120 (Delhi). Accordingly, he submitted that there is no error in the order of learned Assessing Officer, much less causing prejudice to the interest of the revenue in allowing custom duty paid under protest under section 43B of the Act. He further submitted that since the claim of payment of custom duty under protest is clearly allowable under section 43B of the Act, the Learned Assessing Officer was correct in law in computing the assessed loss starting with returned loss of INR 40,29,85,156 as against loss of INR 10,12,47,402 determined in the intimation u/s 143(1) of the Act. 7.6 On the issue of assessee's claim on reversal / utilization of various provisions learned AR submitted that details of all claims disallowed in previous year and reversed / utilized during the year under consideration were duly furnished to learned AO during assessment proceedings. In this context he referred to pages 153-155 & 156 of Paper Book. He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by the predecessor Ld. PCIT. It is not open to the revenue to seek to sustain the impugned order on any issue other than that specifically pointed out therein (Refer: page 38 of the impugned Ld. PCIT's order). In that view of the matter reference to point Nos. 1 to 9 and 11 is not justified. Insofar as the issues raised at point Nos.10, 12 and 13 respectively are concerned, the Assessee has filed detailed submissions with respect to each of the items before PCIT. 10. In the course of hearing, in support of submissions advanced on behalf of the assessee/ appellant, the learned AR relied upon judgment passed by the Hon'ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. v. CIT [2002] 243 ITR 83 (SC) in which Hon'ble Apex Court held as under :- "6. A bare reading of this provision makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (if) it is prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). 11. In the course of hearing, referred CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) Chowdhury, Addl. CIT (19771 109 ITR 229 at 243) in which Hon'ble Apex Court held as under : "2. At this stage we may clarify that under para 10 of the judgment in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal is a question which arises out of the appellate order of the Tribunal; See Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC). Moreover, we find that the argument advanced before us does not raise, a new question. It is merely one of the aspects of the question mooted before the Tribunal The question which has been referred to us is not restricted to the argument raised before the Tribunal, but is widely worded and relates to the validity of the action under section 33B on the facts and circumstances of the case. We can thus examine this question from all the aspects including the one raised by the learned counsel for the assessee. We, therefore, reject the preliminary objection of the learned counsel for the department that the question sought to be argued by the assessee does not arise out, of the order of the Tribunal. Now, reverting to the merits of the case, we find that the only ground upon which the action was taken by the Commissioner under section 33B was that the Income-tax Officer did not apply his mind to the claim of the assessee as contained in Part D of the return. The Commissioner himself did not apply his mind to the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interests of the revenue and, as such, he was not competent to set aside the assessment order and remand the matter to the Income-tax Officer." 13. In course of hearing, referred Income-tax Officer v. D.G. Housing Projects Ltd. [2012] 20 taxmann.com 587 (Delhi) Hon'ble Delhi High Court held as under :- 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 whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. 16. Thus, in cases of wrong opinion or finding 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. 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 justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state that the order of the Assessing Officer is erroneous.' 15. In course of hearing, referred PCIT v. Mohak Real Estate (P) Ltd. [2024] 16 taxmann.com 388 (Delhi), Hon'ble Delhi High Court held as under : "7. In the order under section 263 of the Act, the PCIT also did not record the reasons for arriving at the conclusion that the Assessment Order was erroneous and prejudicial to the interest of revenue, what to say of basing the said discussion on some minimal enquiry. 8. Therefore, we have no hesitation to hold that the order under section 263 of the Act was not sustainable in the eyes of law. Consequently, we find no infirmity in the impugned order of the Tribunal." 16. On the basis of and governed by the established principles of law provided in judicial pronouncements mentioned hereinbefore, from bare perusal of the matter in hand, it appears that all relevant issues in question were properly examined by the Learned AO and decided accordingly. 17. The learned PCIT nowhere doubting any documents submitted and had not even undertaken any minimum enquiry. It is also relevant to mention that the learned PCIT not cited cogent reasons for reaching to conclusion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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