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TMI Blog2021 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Assessing Officer and issued notice to the assessee specifically pointing the errors noted by him vis-à-vis. the above claims of the assessee of Long Term Capital Gains and brought forward business losses. The notice is reproduced at pages 2 to 5 of the order of the PCIT. In response to the same, the assessee contended that the Assessing Officer had examined the issues during the assessment proceedings and the assessee had filed the details and evidences with regard to the same and that the Assessing Officer having been satisfied with the same, had therefore accepted the claim of the assessee. The assessee further replied to each and every specific discrepancy/error pointed out by the Ld. PCIT and contended, therefore, that there was no error in the order of the Assessing Officer. The Ld. PCIT rejected the contention of the assessee and held that the Assessing Officer had accepted the assessee's claim without making any verification with respect to the various expenses claimed against the capital gains and against its business income and since the same needed verification, the order passed by the Assessing Officer was, therefore, erroneous. Accordingly he set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant Open Land'. The assessee in 'Fixed Assets' Schedule has also shown the given property as 'Land'. The A.O., however, blindly allowed the deduction of the given expenditure of Rs. 13.90 lacs from the Capital gain without any application of mind, and without conducting any enquiries. ii) Further, there are 2 bills of commission, one from Rajeev Insulation Products of Rs. 8 Lacs and another of Rs. 5.90 Lacs. The latter one is an unsigned bill. The name of the so-called commission agent has been smudged at the top of the bill. Despite the effort to smudge the name, if is evident that the said bill has also been procured from the same "Mayank Gupta", from whom the bill of repair expenses mentioned above was procured. The A.O. did not care to conduct any enquiry about the genuineness of the assessee's claim of the given expenses. The A.O. just didn't try to find out as to how Mayank Gupta had issued bill for Commission Expenses, as well as for repair of Building, and that too for a vacant land. The smudging of the name at the top of the bill seems intentional with the clear purpose to avoid detection of bogus claim. Further, the bill is also unsigned w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a closed factory needed to be enquired. Even for arguments' sake, it is accepted that repair was undertaken, if is not understandable as to how only one bill of steel could complete the repair process. c) Survey Expenses have been claimed at Rs. 60,000/-. No query was raised by the A.O. to examine the nature and business relevance of the said expenses. Only internal vouchers of the company are available on record, it is not at all clear as to how the said expenses are incidental to the business and how the A.O. satisfied himself regarding the genuineness of the claim. d) Heavy Professional & Legal charges have been debited in the P & L account to the tune of Rs. 56,02,852/-. If is noted that the said expenses are disproportionately higher than the preceding year. If is noted that only general submissions were made in this regard by the assessee. The A.O. did not care to ask the assessee to co-relate the expenses to the exact legal and professional services procured case-wise, and to ascertain the genuineness of the same. e) As per P & L account, there is a payment of Rs. 50,000/- for the purchase of some "book". The said expenses have been booked under the "Miscellaneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out the construction and constructed building and boundary wall etc. and when he vacated the premises, assessee incurred some repair cost as required by the buyer. Since the expenses were incurred in connection and in order to complete sale of property. It was claimed and allowable as expenditure. In the show cause notice, there appears some typing error in mentioning Rs. 8,00,000/- as Rs. 8,80,000/- and accordingly total wrongly mentioned as 28,60,000/- where as correct amount is Rs. 27,80,000/- 2. Repair and maintenance expenses amounting to Rs. 10,33,079/-.: In the show cause notice, there appears some typing error in mentioning Rs. 10,35,079/- instead of correct figure Rs. 10,33,079/-. Details of repair and maintenance expenses were submitted before Learned AO (refer Page no ..... to .....). Details re produced herein below:- Financial Grouping Tally Grouping Debit Repair & Maintenance MISC REPAIRS (DEL) 7,500 Repair & Maintenance REPAIRS TO OTHER BUILDING (SBD 67,930 Repair & Maintenance Office Upkeep 22,504 Repair & Maintenance Repair & Maintenance -Computer 14,055 Repair & Maintenance Repairs & Maintenance (Delhi) 921,090 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though some are available but are of inferior quality and not acceptable to the manufactures of equipment's in government sector I organized sector. Some of the import customers are Indian Railways Coach building factory RCF-Kapurthala, National Aerospace, NSTL Vishakhapatnam, Hindustan Aeronautics Ltd. Etc. and in corporate sector like Suzlon, Sterling group Enercon India, Paharpur Cooling Tower etc. c. These customers float Global tender enquiry for the specialized items required and we on behalf of our principal company in Switzerland I USA and China submit the price and technical bid. All work connected to the technical approval, price negotiation and fill the finalization of the order is looked after by our team of sales, marketing and technical person who have been trained in USA Factory of our foreign principals. d. After the order finalization, all work connected to the opening of letter of credit, and thereafter the work connected to the receipt of goods in India, inspection, customs clearance and handling forwarding etc. till receipts of goods to customers is under the supervision of our officers. The Job requires extensive travelling and close coordination at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name "Composite Polymers & Specialties Company, a Unit of Indian Sulphacid Industries Limited. The assessee travels frequently to attend workshops, launches of the products. The assessee has submitted complete details of travelling expenses alongwith bills and vouchers. Intact for foreign travelling copy of Invitation/email trails were also asked by learned AO and produced by the assessee. (Copies attached .......................) From the above it can be slated that assessee has incurred travel conveyances expenses and thus correctly allowed by learned AO. Under the above circumstances, your good self will appreciate that learned AO has carried out complete enquiry, including independent inquiry and after being satisfied with the details submitted before him from time to time has allowed the claim of cost of Improvement from long term capital gains. Accordingly, it is requested that the proceedings u/s. 263(I) may kindly be dropped." 7. The Ld. Counsel for the assessee contended that despite the specific issue wise response filed by the assessee, the Ld. PCIT without dealing with the same held the order erroneous for lack of enquiry and further for the reason that the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revisionary provisions not only when the order is held erroneous but it also has to be prejudicial to the interest of Revenue. Several case laws have been relied upon. In the present case, the Assessing Officer completed the assessment without any application of mind and without conducting any worthwhile enquiries as is evident from the reasons spent out in the show cause letter for initiating the revisionary proceedings u/s. 263 of the Act. The AO blindly accepted assessee's claims without any independent verification as will be evident from the ensuing discussions. There were no subsequent events that were not available to the AO at the time of making the assessment. It has been held by many courts that where there is lack of proper enquiry or application of mind the invoking of provisions of Section 263 is rightful and justified (Shiv Automobiles Vs. ITO [2010] 133 TTJ 505: 43 DTR 345 (ITAT Agra) where the claims of deductions were allowed without any application of mind, the order of revision was held to be justified. (CIT Vs. Alloy Steel (2013) 359 ITR 355 : 217 Taxman 262 (Kar). The Courts have held that an order by the Assessing Officer without application of min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w documents from the assessee and placing them on record. The order passed by the A.O. is, therefore, held to be erroneous in so far as it is prejudicial to the interest of Revenue. The same is accordingly set-aside with the directions to the A.O. to make the assessment afresh after inter alia considering all the facts/issues discussed above. The A.O. is also directed to allow reasonable opportunity of being heard to the assessee before passing the assessment order in this case." 10. As is evident from a bare perusal of para 5-9 above the Ld. Pr.CIT has dealt with each issue flagged in her show cause notice, and admitted to the fact of details, evidences and explanations vis-à-vis. the same being filed by the assessee, but has held that they need further verification. Surprisingly though no reason has been given for the need for further verification. 11. Undoubtedly the purpose of assessment is to verify the claim of the assessee to the income returned for taxation. But the extent and manner of verification is dependent on the subjective satisfaction of the assessing officer. All claims are primarily substantiated by supporting evidences/documents. It is not that every evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y declared that, for the purposes of this sub-section,-
Explanation-1 ..............................
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Explanation-2 For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,-
(a) The order is passed without making inquiries or verification which should have been made;"
13. The order of the Ld. Pr.CIT, in the impugned case, falls grievously short of this requirement of pointing out the absence of enquiry "which should have been made" in the present case. And therefore, we hold, that there is no finding by the Ld. Pr.CIT of the assessment order being erroneous. The jurisdiction assumed by the Ld. Pr.CIT, therefore u/s. 263 of the Act for revising the assessment order therefore, is, we hold, not as per law and the order so passed by the Ld. Pr.CIT is accordingly set aside.
14. The appeal of the assessee stands allowed.
Order pronounced on 22.02.2021. X X X X Extracts X X X X X X X X Extracts X X X X
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