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TMI Blog2020 (9) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... er u/s 263 in instant case. The assessee s return was subject to complete scrutiny and after making detailed enquiry and verification of the impounded documents/records seized during the course of survey u/s 133A A.O. determined total income after making addition u/s 40A(3) and lump sum addition for personal element of use in various expenses claimed in P L account. During the course of assessment, the assessee has produced books of accounts, cash book, bills/vouchers etc. Given these undisputed facts as apparent from the assessment order, it is clearly apparent that the assessee has undergone through two detailed proceedings - survey proceedings under section 133A and thereafter assessment proceedings under section 143(3) of the Act where its books of accounts were examined not just once but twice by the departmental authorities and accepted after considering the surrendered amount except for certain additions as made under section 143(3) of the Act. AO has made sufficient enquiries, considered the survey records and the surrender made by the assessee and after considering the submissions of the assessee and due application of mind completed the assessment proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has raised following grounds of appeal: 1. That the learned Principal Commissioner of Income Tax-3 Jaipur has grossly erred both in law and on facts in invoking the provisions of section 263 of the Act holding the assessment order dated 29.12.2017 to be erroneous and prejudicial to the interest of Revenue which is contrary to the provisions of law and facts therefore, the impugned order u/s 263 of the Act dated 19.03.2020 kindly be quashed. 2. That the learned Pr. CIT-3 Jaipur erred in law as well as on the fact of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the subjected assessment order passed on dated 29.12.2017 was without making proper enquiries. Such finding and the assumption of jurisdiction, both are contrary to the provisions of law and facts on record. Hence the proceedings initiated u/s 263 of the Act and the impugned order dated 19.03.2020 kindly be quashed. 3. That the learned Pr. CIT-3 Jaipur erred in law as well as on the facts of the case in setting aside the assessment order dated 29.12.2017 with reference to all the following issues, merely on suspicion, surmises conjectures, and in wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 3,00,00,000/. Subsequently assessee company filed return of income declaring an income of ₹ 4,01,29,300/-. The said return was selected for completed scrutiny and assessment was completed u/s 143(3) of the Act. The assessment was completed at total income at ₹ 4,09,98,505/- after making an addition of ₹ 2,69,205/- u/s 40A (3) of the Act and lump sum addition of ₹ 6,00,000/- for personal element of use in various expenses claimed in P L account. Thereafter the ld. Pr.CIT-3, Jaipur examined the assessment record of assessee company and opined that assessing officer failed to verify various issues during the course of assessment proceedings. The show cause notice issued by Pr. CIT -3 is also reproduced herein below: - 2. Perusal of the assessment record reveals the following issues which the AO has not verified: 1. A survey action vide u/s 133A of the Act was carried out in this case on 19.02.2015 wherein the assessee company offered a sum of ₹ 3.00 Crs., for taxation out of the surrendered amount the assessee recorded ₹ 2,20,00,000/- as coaching fee advance under the head revenue from operation. 2. Accordingly, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 12.As per the statements of Shri Rajesh Kulhar, Director of M/s Guru Kripa Institute Pvt. Limited recorded on 19.02.2015, the director in his reply to Question No. from 18 has accepted investment in Hanuman Nagar, Sikar situated building under construction and some other heads. This issue has not been examined by the AO. Similarly, in reply to Question Nos. 21 to 23 the Director had not been able to verify the difference in Trial Balance which was not examined at the time of assessment proceedings. 13.While framing the assessment order the AO failed to tax the head-wise undisclosed surrendered income as per the applicable provisions of Sec. 68 to 69D read with Section 115BBE of the Income Tax Act, 1961. Accordingly, the AO has not brought to tax the surrendered income as per applicable provisions of the Act. 14.The AO has not verified the amount of ₹ 45,85,897/- under the head Staff Payable . 15.The AO has not at all verified all the issues enumerated from (1) to (14) and has not asked for the reasons for substantially high expenditure debited in the Profit Loss Account. 3. Necessary powers have been conferred upon the undersigned by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the ld. Pr.CIT, the assessee is in further appeal before the ITAT. 5. It was argued by the ld AR of the assessee that for invoking provisions of section 263 the condition precedent is that assessment order passed by A.O. is erroneous and prejudicial to the interest of revenue i.e. both conditions must co-exist. In the case of assessee company the order is neither erroneous nor prejudicial to the interest of revenue. It was explained by the ld AR that a survey has been conducted at the business premises of the assessee wherein the books of accounts and other documents maintained by the assessee were examined by the survey team deputed by the Revenue, statements were recorded and the assessee surrendered an amount of ₹ 3.00 crore which was subsequently offered to tax in the return of income. Thereafter, the return of income filed by the assessee has been subjected to the scrutiny assessment under section 143(3) of the Act. The AO in his order passed under section 143(3) of the Act has stated that survey has been conducted wherein the assessee has surrendered an amount of ₹ 3.00 crore which has been offered to tax in the return of income. Our attention was invited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue, the AO exercises quasi-judicial power vested in him and if he exercises such powers in accordance with law, arrives at a just conclusion such conclusion cannot be termed to be erroneous only because the CIT does not feel satisfied with the conclusion. The Delhi High Court in case of CIT Vs. Kelvinator of India Ltd. (2011) 332 ITR 231 (Delhi) it has held that Assessing officer taking one of two possible views with which commissioner not agreeing the assessment order cannot be treated as an erroneous order prejudicial to the interest of revenue. The Karnataka High Court after considering various judicial pronouncement in the case of CIT Vs. Gokul Das Exports (2011) 333 ITR 214 (Kar) has held that assessing officer taking one out of two views the assessment order is not prejudicial to interest of revenue. In view of the above judicial pronouncements and various other judgements on the issue the assessment order passed by A.O. cannot be treated as an erroneous and prejudicial to the interest of revenue. In the case of CIT Vs. Vodafone Essar South Ltd. (2013) 2012 Taxman 184 Hon'ble Delhi High Court held that assessing officer before passing assessment order made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls Pvt. Ltd. Vs Pr. CIT, Central, Jaipur (ITA No. 290/JP/2017) dated 04-09-2017 has held that there is doubt as to whether the newly inserted Explanation 2(a) to section 263 of the Act was inserted by the Finance Act, 2015 w.e.f. 01-06-2015 would be applicable to assessment order passed prior to the effective ness of the amendment yet we are of the view that explanation cannot be said to have override the law interpreted by the Hon ble Delhi High Court in case of Nagesh Knitwears Pvt. Ltd. (2012) 345 ITR 135 Where in the Hon ble Delhi High Court has elucidated and explained the scope of provision of 263 of the Act and the same has been extracted by hon ble Delhi High Court in the case of CIT vs. Goetze (India) Ltd 361 ITR 505 which read as under:- Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to conclusion and himself decided 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 AO will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of income-tax cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prudent officer should have carried out in such cases. Under these facts and ratio decided by the Hon ble Supreme Courts in case of CIT Vs Green World Corporation 314 ITR 81 (SC), CIT Vs Kelvinator of India Ltd. 332 ITR 231 (Delhi), CIT-8 Bombay Vs Fine Jewellery (India) Ltd. 372 ITR 217, we are of the considered view that it is not a fit case of invoking the provisions of section 263 of the Act. Therefore, we set aside the order of Ld. Pr CIT and restore the assessment order on this issue in the light of above deliberations. It is thus submitted that impugned order u/s 263 passed Ld. Pr. CIT 3 Jaipur is wrong, bad in law and without jurisdiction and therefore, deserves to be cancelled/set aside. 9. On the other hand, it was contended by the ld CIT-DR that the assessee has offered ₹ 3.00 crores as net income in addition to the regular income during the course of survey and also paid taxes thereon. However, while framing the assessment, the A.O. has not considered the net income offered by the assessee nor the amount of tax which have already been paid by the assessee during the course of survey. 10. The ld CIT-DR has further contended that the investment made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enquiries on the issue and assessee complied to the enquiries and filed all the required details. Thus, it is not a case where that A.O. made no enquiry or verification which should have been made. It is clear from reading of notice u/s 263 of the Act, that the proceedings u/s 263 has been started on the same issue which have already been considered and examined by the then A.O. The allegation of the ld. Pr.CIT was as under: i) Alleged short offer of coaching fee revenue by ₹ 2.20 crore for taxation out of total surrender of ₹ 3.00 crore during the course of survey. ii) Alleged abnormal increase in salary, Celebration, legal and rent expenses iii) Alleged various expenses of ₹ 3,34,500/-in violation of section 40A(3). iv) Alleged non-verification of claim of depreciation on computer and furniture and vehicle running expenses, advertisement expenses v) Abnormal increase in Cash in hand post survey vi) Outstanding liabilities in sundry creditors for advertisement and rent expenses and staff payable vii) Alleged non-verification of construction in building and non-reconciliation of trial balance viii) Alleged non-application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the ld. Pr.CIT that merely on account of nomenclature of account head as Coaching Fee Advance, the ld Pr.CIT assumed that said amount was not offered to income. The said amount of ₹ 2.20 crore is part and partial of the offered amount of ₹ 3.00 crore during the course of survey proceedings and verified with the underlying books of accounts and assessment record. 15. We had also carefully gone through the Accounting Policies forming part of the audited financial statements of the assessee company. In the schedule of Accounting Policies accounting policy pertaining to revenue recognition is disclosed as per policy No.1 (k). 1 (k) REVENUE RECOGNITION Revenue is recognized only when it can be reasonable measured and there exists reasonable certainty of its recovery. Fee/Income collected in advance for the period subsequent to the accounting period is shown as current Liability 16. It is also evident from the audited financial statements read with aforesaid accounting policy that the ₹ 2.20 crore forming part of offer of income during the course of survey action was declared under the head Revenue from Operation and offered to tax. Had the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in response and reply to query letter dated 20-12-2017, assessee company has duly filed statement containing details of salary wages with each name of employee as well as its bifurcation as teaching and non-teaching staff. The said detail also contained the total amount of salary paid and TDS deducted thereon as applicable 20. From the record we also found that during the year under assessment, Alwar Brach of the assessee company was also started and salary expenses of ₹ 17,21,996/- was incurred on staff employed with Alwar Branch. Copy of ledger account of salary head showing monthly summary for each of the month from April to March of the financial year was placed in the paper book which was also filed before Ld. Pr.CIT-3. It is apparent from the perusal of the said ledger account that for every month salary expenses at Sikar Branch is between ₹ 40 lacs to 43 lacs i.e. before survey took place in February 2015 as well after month of survey. During the course of survey proceedings, no adverse issue was noted regarding salary expenses. Since assessee company has already bifurcated the employees between teaching and non teaching staff and as such not further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Professional expenses F.Y. 2014-15 F.Y. 2013-14 81,92,200/- + (Professional Fee to tutors Rs. NIL) 3,85,100/- + (Professional Fee to tutors ₹ 85,51,000/- On perusal of above detail which are verifiable from the Other Expenses head in the audited profit and loss account during the F.Y. 2014-15 entire expenses relating to legal and professional expenses including professional fee to tutors was debited and accounted for in single ledger account head i.e. Legal and Professional Charges, where as in the preceding year 2013- 14 legal and professional expenses of ₹ 3,85,100/- and Professional fee to tutors ₹ 85,51,000/- were separately debited/accounted for in two ledger account as appearing in the audited profit loss account. As such in fact there is decrease in legal and professional expenses by ₹ 7,43,900/- rather than increase as pointed in the show cause notice issued U/s 263 of the Act. 24. With regard to rent expenditure as alleged by the ld. Pr.CIT , we observe that vide Para 2 of the reply letter to the questionnaire dated 20- 12-2017, filed before Ld. Pr.CIT- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,69,600/- 25. We also found that additionally copy of rent deed w.r.t. to premises taken on rent was also being filed before Ld. Pr.CIT-3. Rent expenses was verified by AO from the details and documentary evidence filed. 26. With respect to observation of the Pr.CIT regarding Student and Welfare expenses of ₹ 5.00 lacs allowed without verification, we observe that the said expenses was paid to M/s Guru Kripa Hospital Research Centre Private Limited and was duly declared in related party transaction details in the audited financial statements as well as in relevant column in Form 3CD filed u/s 44AB of the Act. The said expenses of ₹ 5.00 lacs duly explained and verified by the AO during the course of assessment proceeding. The said expenses incurred was of ₹ 5.00 lacs in the year under assessment as compared to expenses amount of ₹ 54.57 lacs in the preceding year. Assessee company has entered into tie-up with M/s Guru Kripa Hospital Research Centre Private Limited for offering concessional health/medical consultation to the students of its institute and thereby in fact minimized drastically its expenses on said head. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o alleged that deprecation on furniture and computers was allowed as claimed in the return of income without any verification. The said observation is far away from the details filed and available on assessment record of the assessee company. Vide its 3rd reply letter to the questionnaire dated 20-12-2017, assessee company had filed detail of addition made to various fixed assets along with copy of bills/vouchers where the amount of such addition was more than ₹ 50,000/- in case of building construction and in other case of other fixed asset addition, where the amount exceed ₹ 10,000/-. 31. We also found that over and above addition to said assets were duly verified by the Tax Auditor and certified in the deprecation chart with respective date of addition in Form 3CD. During the year under assessment addition to the computers were made for ₹ 19,06,350/-. On 14-05-2014 vide bill no. 2025 dated 14-05-2014 85 desktop computers were purchased for ₹ 17,55,250/- (each costing ₹ 20650/-). (Copy of the ledger account and copy of invoices for additions in the computer head are again placed on record, were filed before Ld. Pr.CIT. The said desktop computers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is abnormal increase in cash and no justification was offered by assessee company. Further monthly summary of cash books having month-wise opening balance, receipts, payments and closing balance for the year under consideration was also filed before the Ld. Pr.CIT-3. 35. From the record, we also found that during the year under assessment advertisement expenses of ₹ 1.93 crore were incurred in comparison to ₹ 2.12 crore in the preceding assessment year. During the year under assessment the advertisement expenses have reduced from 2.12 crore to ₹ 1.93 crore due to better rate negotiations with advertising agency. Assessee company has filed advertising agency wise detail of advertisement expenses and copy of confirmations of Mahesh Advertising Agency and Sai Advertising Agency along with 1st reply letter to the questionnaire dated 20-12-2017. Thus, there is no merit in the ld. Pr.CIT s allegation that at this stage, expenses were not verified by the A.O. 36. In the para 2.10 of the show cause notice Ld. Pr.CIT has observed that amount payable against Trade Expenses to following parties have not been verified. S.No. Name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the year of ₹ 2,16,59,171/- was lying at Sikar (inadvertently in grouping to the audited financial statements, written as Jaipur) and at Alwar ₹ 50,012/- The assessee company is not having any business activities at Jaipur. 40. The ld. Pr.CIT has also alleged that investment in building construction at Hanuman Nagar Sikar (JEE Coaching Building) as accepted in the statement of Mr. Rajesh Kularia Director of the company in reply to question no. 18 has not been examined by the AO. The said allegation is far away from facts of the case. From the reply of the said question it is very much apparent that the construction expenses of ₹ 2,71,04,786/- incurred up to 19-02-2015 was from trial balance forming part of the accounts. The said expenditure was already duly recorded in the books of accounts and detail of construction expenses and bills/vouchers of individual expenses exceeding ₹ 50,000/- or more were filed with 3rd reply letter to the questionnaire dated 20-12-2017. 41. Further question no. 21 was pertaining to total coaching receipt of ₹ 14,05,39,498/- as per books of accounts and ₹ 15,88,37,699/- as per Annexure-A-1 (detail of fee r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Commissioner of Income-tax, [2020]114 taxmann.com 91 (Kerala), wherein it was held as under:- Section 115BBE, read with sections 68, 71 and 263, of the Income-tax Act, 1961 - Tax on income referred to in section 68 to section 69D (Set of loss) - Assessment year 2013-14 - During year, assessee filed its return of income and claimed set off of carried forward loss (unabsorbed portion of depreciation) - Same was allowed - Principal Commissioner invoked revision under section 263 on ground that assessee's income included deemed income being unexplained cash credit under section 68 which is not classified under any heads of income under section 14; therefore, set off of brought forward loss against this deemed income was not correct- Whether amendment brought in section 115BBE(2) by Finance Act, 2016 whereby set off of losses against income referred to in section 68 was denied, would be effective from 1-4-2017 - Held, yes - Whether, therefore, during relevant assessment year, there was no bar existed with respect to allowing set off of carried forward unabsorbed depreciation on fixed assets against deemed income under section 68 - Held, yes [Para 14] [In favour of as ..... 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