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2019 (12) TMI 1530 - AT - Income TaxRevision u/s 263 - whether the AO has made enquiries about issue under consideration? - CIT noticed that the assessee has debited in the Profit Loss Account toll Plaza expenses which included expenses of computer expenses and on weigh bridge expenses - HELD THAT - Pr.CIT has not specified that which enquiries were ought to have made. The assessee further submitted that the Pr.CIT in his notice himself mentioned that the assessee examination of records showed the discrepancies, which means that the details were on record and were examined by the AO. Explanation 2 to section 263 was inserted with effect from 01.06.2015, hence, same is not applicable for the assessment year under consideration as it is not retrospective in nature. The assessment order passed after verification and enquiry is not erroneous and prejudicial to the interest of the Revenue. Merely just because the view taken by the AO was not found acceptable does not mean that the AO has failed to make requisite enquiries. If the answer is affirmative then second question arises whether the acceptance of the claim by the AO was a plausible view or on the facts of the finding on the facts that the said finding of the AO can be termed as sustainable in law. We find that vide questionnaire, the assessee was asked regarding Toll Plaza expenses consisting computer and weigh bridge expenses, court fee expenses, which were appropriated in new contractor account, the court fee expenses and recovery suit expenses were relating to business of the assessee licence fee, Ahatas income is duly shown as para copy of ledger account filed. The assessee had furnished his reply, which is found placed in the Paper Book Pages as referred above. AO had made enquiries under Limited scrutiny assessment. We find that the AO has made due enquiries and had taken a plausible view, hence, same, cannot be disturbed by Pr.CIT in the name of further, verification and framing fresh assessment. Since the AO has made during enquiry and examined the issues, hence, invocation of Explanation 2 of section 263 is not justified no it is applicable for the assessment year under consideration as it was inserted with effect from 01.06.2015. Pr. CIT has not done any enquiry and not suggested what enquiries were to be carried out. In view of this matter, and relying on above mentioned judicial pronouncements, we find that twin condition were not satisfied for invoking the jurisdiction under section 263 of the Act. Therefore, in absence of the same the Ld. Pr. CIT was not correct in exercise the jurisdiction under section 263 of the Act and setting aside assessment for making denovo and accordingly, we quash the impugned order passed under section 263 of the Act and allow the appeal of the assessee. Appeal of the assessee stands allowed.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr.CIT) under section 263 of the Income Tax Act. 2. Whether the assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the Revenue. 3. Adequacy of the Assessing Officer’s (AO) enquiries and verification during the assessment process. 4. Applicability of Explanation 2 to section 263 to the assessment year under consideration. Detailed Analysis: 1. Jurisdiction of the Pr.CIT under section 263 of the Income Tax Act: The appeal by the Assessee challenges the order of the Pr.CIT dated 26.03.2019, which was passed under section 263 of the Income Tax Act, 1961. The Pr.CIT is empowered to act under section 263 when he considers that the AO's order is erroneous and prejudicial to the interest of the Revenue. The Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) clarified that both conditions (erroneous and prejudicial) must be satisfied for the Pr.CIT to assume jurisdiction under section 263. 2. Whether the assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the Revenue: The Pr.CIT observed that the AO failed to make necessary enquiries regarding certain expenses claimed by the assessee, such as toll plaza expenses, computer expenses, weigh bridge expenses, court fees, and income from Ahatas. The Pr.CIT held that the AO's order was erroneous and prejudicial to the interest of the Revenue because these enquiries were not adequately addressed. 3. Adequacy of the AO’s enquiries and verification during the assessment process: The assessee argued that the AO had duly verified and applied his mind to the issues under consideration. The AO had raised specific queries regarding the expenses, and the assessee had provided detailed replies. The Tribunal noted that the AO had made enquiries and taken a plausible view based on the information provided by the assessee. The Tribunal emphasized that lack of enquiry makes an AO's order erroneous, but inadequate enquiry does not. The Tribunal cited several judicial precedents, including CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi), which held that inadequacy of enquiry does not give jurisdiction to the Pr.CIT under section 263. 4. Applicability of Explanation 2 to section 263 to the assessment year under consideration: Explanation 2 to section 263, inserted with effect from 01.06.2015, deems an order to be erroneous and prejudicial to the interest of the Revenue if it is passed without making necessary enquiries or verification. The Tribunal noted that the assessment year under consideration was 2014-15, and the amendment was not retrospective in nature. Therefore, Explanation 2 was not applicable for the assessment year under consideration. Conclusion: The Tribunal concluded that the AO had made due enquiries and had taken a plausible view, which cannot be disturbed by the Pr.CIT in the name of further verification and framing a fresh assessment. The Tribunal quashed the impugned order passed under section 263 of the Act, as the twin conditions for invoking jurisdiction under section 263 were not satisfied. The appeal of the assessee was allowed. Order Pronouncement: The order was pronounced in the open Court on 19.12.2019.
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