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TMI Blog2019 (11) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... by quashing the disallowance made. 3. In the facts and circumstances of the case and in law, the ld. PCIT has erred in making addition of Rs. 100000/- by disallowing deductions u/s 80C of the Income Tax Act. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the disallowance made. 4. The assessee craves its right to add, amend or alter any of the grounds on or before the hearing." 2. The assessment in the case of the assessee was completed under section 143(3) of the IT Act on 26.12.2016 at the total income of Rs. 59,33,000/- as against the returned income of Rs. 6,64,126/-. Subsequently, the ld. PCIT on examination of the assessment record noted that the assessee derives income from business of real estate and paid cash payment of Rs. 6,82,000/- for purchase of plot No. A-123, Sitaram Vihar Vistar, Village Ramsinghpura, Tehsil Sanganer, Jaipur. Similarly, in other case the assessee has paid the purchase consideration in cash. Accordingly the cash payment made by the assessee towards purchase of stock-in-trade during the year under consideration was found to be hit by the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not in case of inadequate or lack of enquiry. He has also relied upon the decision of Hon'ble Supreme Court in case of CIT vs. Max India Ltd., 295 ITR 282 (SC) and submitted that the Hon'ble Supreme Court has held that the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with the expression "erroneous" order passed by the AO. 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. If the AO adopts one of the two courses permissible in law and if it has resulted in loss of revenue or where two views are possible and the AO has taken one view which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the revenue. Thus the ld. A/R has submitted that the ld. PCIT has wrongly and illegally invoked the provisions of section 263 and held that the assessment order is erroneous and prejudicial to the interests of the Revenue. 4. On the other hand, the ld. D/R has submitted that the AO has not conducted any enquiry on both the issues which were taken up in the revision proceedings. It is a case of complete lack of enquiry on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Rules. We find that though the AO has passed a very lengthy order running into 43 pages, however, the issue of applicability of section 40A(3) as well as the correctness of the claim of deduction under section 80C were not taken up for verification by the AO. Thus the assessment order is completely silent on these issues and there is nothing on record to suggest that the AO has even raised any query on these two issues. Thus, the case of the assessee falls in the category of complete lack of enquiry on these two issues. Therefore, we do not find any merit or substance in ground no. 1 of the appeal of the assessee. The lack of enquiry on the part of the AO renders the assessment order erroneous in so far as prejudicial to the interests of the revenue. Accordingly, the exercise of jurisdiction under section 263 of the IT Act is valid and proper. Ground No. 2 is regarding the observation of the ld. PCIT on account of disallowance under section 40A(3) of the IT Act in respect of the payment made in cash of Rs. 8,36,000/-. 6. The ld. A/R of the assessee has submitted that the case of the assessee is covered under section 44AD of the Act as the turnover of the assessee is Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea that the provisions of section 44AD are applicable in the case of the assessee though the assessee has declared the income under the normal provisions of the Act based on the books of account. Once the assessee has filed the return of income declaring the income based on the business results shown in the books of account then the AO is required to examine the correctness of the return of income and claim of the assessee in the context of business results shown as per the books of account. The assessee did not claim the applicability of the provisions of section 44AD either before the AO or before the ld. PCIT. Even otherwise, this plea of the assessee is also required to be verified based on the relevant facts as recorded in the books of account. Therefore, merely because the turnover of the assessee for the year under consideration is less than the limit provided under section 44AD, would not preclude the ld. PCIT to exercise his jurisdiction under section 263 regarding violation of provisions of section 40A(3) of the Act. The payment of cash for purchase of plots of land shown as stock-in-trade is not in dispute, therefore, the explanation furnished by the assessee are requi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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