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TMI Blog2021 (7) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... asion of any suspicion of excess claim, which warrant comparison of the figures with the original return. Before the PCIT, the assessee has produced all the details of the original return and revised return along with enclosures, but PCIT has not pointed out any error in the said explanation of the assessee. He has merely directed the Assessing Officer to obtain all the details and take necessary action. This action of the Learned PCIT is not justified in view of the precedents discussed above. Unsecured loans - Assessee filed all the confirmations of unsecured loans before the Learned PCIT and detailed in respect of addition to loan during the year under consideration. Though PCIT has mentioned that no bank statement or Copy of IT return has been filed in respect of the lenders and therefore directed the Assessing Officer to verify and take appropriate action. PCIT has not pointed out as which loans have been accepted erroneously by the Assessing Officer. Similarly, on the issue of sundry creditors, it was submitted by the assessee before the Learned PCIT that once trading results are accepted by the Assessing Officer, no addition can be made for sundry creditors under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee. - ITA No. 450/Del/2021 - - - Dated:- 27-7-2021 - SHRI KUL BHARAT , JUDICIAL MEMBER AND SHRI O. P. KANT , ACCOUNTANT MEMBER Appellant by : Sh. Gautam Jain , Adv. Sh. Lalit Mohan , CA Respondent by : Ms. Pramita M. Biswas , CIT ( DR ) ORDER PER O. P. KANT , AM : This appeal has been preferred by the assessee against the order dated 16/03/2021 passed by the Learned Principal Commissioner of Income-tax, Faridabad [in short the Learned PCIT ] under section 263 of the Income-tax Act 1961 (in short the Act ) for assessment year 2015-16, raising following grounds: 1. That order dated 16.3.2021 u/s 263 of the Act by learned Principal Commissioner of Income Tax, Faridabad has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 1.1 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal raising the grounds as reproduced above. 3. Before us, the parties appeared through Video Conferencing facility. The assessee filed a paper-book containing pages 1 to 276. 4. The learned Counsel of the assessee submitted that the Learned PCIT has held the order of the Assessing Officer erroneous insofar as prejudicial to the interest of the Revenue on three counts. Firstly, the discrepancy in the revised and original audit report; Secondly, no enquiry in case of unsecured loans; and Thirdly, no enquiry in case of sundry creditors and debtors. 4.1 The learned Counsel of the assessee referred to page-3 of paper-book filed by the assessee and submitted that in the original return of income loss of ₹ 2,83,67,943/- was claimed for carry forward and this loss was due to depreciation loss of ₹ 8,36,54,720/-. He referred to list of fixed assets on which said depreciation was claimed available on page 4 of the paper-book. He further submitted that assessee revised its loss to ₹ 1,59,41,161/- due to reduction in claim of the depreciation to ₹ 2,07,12,27,938/-, asset-wise detail of which is available on page 47 of the paper-book. 4.2 The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of all these persons were duly filed before the Assessing Officer as well as before the Learned PCIT and no adverse inference has been drawn by the Learned PCIT. 4.5 The Learned Counsel further submitted that entire trading results are based on audited books of account of which complete details were furnished during the course of assessment proceeding. He submitted that once the trading results are accepted, any adverse observation on sundry debtors/creditors is fundamentally misconceived and misplaced. According to him, the books of account stand accepted, no addition can be made out of sundry creditors under section 68 of the Act particularly when the trading results are accepted by the learned Assessing Officer as well as by the Learned PCIT. In support, he relied on following decisions: 1. ITA No. 325/2008(del) CIT Vs Ritu Anurag Agarwal 2. 205 CTR 444 (all) CIT Vs PanchamDass Jain 4.6 The learned Counsel referred to the submissions made before the Learned PCIT. Regarding the discrepancy in audit report, he submitted before the Learned PCIT that return of income was revised due to change in depreciation and some figures in original balance-sheet w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting aside the assessment order holding the same to be erroneous insofar as prejudicial to the interest of the Revenue. 6. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute before us is whether the assessment order passed by the Assessing Officer satisfies the twin conditions of section 263 of the Act. Those two Conditions are that, the order should be erroneous as well as prejudicial to the interest of the Revenue and if these two conditions are satisfied, the Learned PCIT is justified in setting aside the order of the Assessing Officer. 6.1 The Hon ble Delhi High Court in the case of ETT Ltd. Vs CIT (supra) that Learned CIT or PCIT must conduct prima-facie inquiries and come to a conclusion that assessment order is erroneous. Without concluding enquiries to hold that the order is erroneous, such action of the Learned CIT/PCIT is not justified. The relevant finding of the Hon ble High Court is reproduced as under: 35. The revisionary jurisdiction u/s. 263 cannot be exercised simply to make roving and fishing enquiry. It is a well settled law decided by the various Courts in the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually the aforesaid impugned order dated 31.03.2018 was passed by the Ld. CIT on 31.03.2018. Thus, it is seen that although the revision proceedings u/s. 263 of IT Act prolonged for a few months, the impugned order was passed by the Ld. CIT on the last day of limitation period, i.e. on 31.03.2018. A perusal of the aforesaid impugned revision order dt. 31.03.2018 passed u/s. 263 of IT Act shows that although submissions made by the assessee vide aforesaid written submissions dated 08.02.2018 and 23.02.2018 have been mentioned; the contents of these submissions have not at all been discussed by the Ld. CIT. Even as far as aforesaid written submissions dated 11.12.2017 is concerned, only a small portion of it has found mention in aforesaid impugned revision order dated 31.03.2018 passed by Ld. CIT u/s. 263 of IT Act. Thus, it is obvious that the material brought by the assessee for the consideration of Ld. CIT have not been fully factored in by the Ld. CIT; and the Ld. CIT has not fully dealt with the entire force of assessee's submissions before making an adverse decision against the assessee. Moreover, the Ld. CIT has observed in a cryptic, summary and nonspeaking manner in afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion of preference shares during the relevant years, the assessee gave a reply dated 2-1-2019. This has been extracted by the Tribunal in paragraph 3.2 of the impugned order. We find the explanation to be cogent and in fact, the factual matrix was appreciated by the Tribunal to hold that the PCIT could not have invoked the revisionary jurisdiction under section 263 of the Act mainly on the ground that substantial increase in capital investment reflected by the assessee in his balance sheet as compared to the preceding year. The Tribunal further pointed out that these issues were raised by the Assessing Officer in the scrutiny assessment and that the assessee had given proper explanation, which was taken note of by the Assessing Officer while completing the assessment under section 143(3) of the Act. (Emphasis supplied externally) 6.1.2 The Hon ble Gauhati High Court in the case of Abdul Hamid (supra) has held that for invoking section 263 of the Act, Ld. PCIT should point out a specific error or mistake on the order of the Assessing Officer rather than using probability or guess work. The relevant finding of the Hon ble High Court is reproduced as under: 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue. Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of Revenue in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is null in the eye of law and therefore we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the PC1T. Therefore, we quash the order of Ld. PC1T dated 11-12-2018 being ab initio void. (Emphasis supplied externally) 6.1.3 The Hon ble Delhi High Court in the case of PCIT Vs Delhi Airport Metro Express Private Limited (supra) has made similar observation and held that the burden is on the PCIT to show that there is an error in the order of the assessment. In absence of which, action under section 263 is not justified. The relevant finding of the Hon ble High Court is reproduced as under: 10. For the purposes of exercising jurisdiction under Section 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is erroneous . The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry ; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 6.1.5 The Mumbai bench of the ITAT in the case of Narayan Tatu Rane (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anyu Gupta (supra) also following the decision of the Hon ble Delhi High Court in the case of Delhi Airport Metro Express Private Limited (supra) held that it is necessary to demonstrate that the error which the authority seeks to address is set out in the order to show how the error to be prejudicial to the interest of the Revenue. The relevant finding of the Tribunal is reproduced as under: 4.4 In the facts of the present case we find that the Pr. CIT has failed to point out the error committed by the assessing officer let alone such an error which can be considered to be prejudicial to the interests of the Revenue. The law does not permit the authority the exercise of revisionary powers to initiate fishing Shri Abhimanyu Gupta ITA No. 771 /Chd/2017 Assessment Year : 2012- 13 and roving enquiries. The assessing officer in the facts of the present case we note has passed an order after conducting detailed enquiries on all the issues the Pr. CIT has flagged various issues and on going through the record we note that he has failed to give any finding as to how and in what manner the order of the assessing officer on the various issues noted by him can be said to be erroneous le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reaching the conclusion that the order of the AO is erroneous and prejudicial to the interests of the revenue the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interests of the revenue. In the facts of the present case we find that no such exercise has been done. 6.2 In view of the above judicial precedents, we are of the opinion that it is prerequisite for the PCIT to carry out minimal inquiries on the issues on which he has proposed to set aside the order of the Assessing Officer and thereafter demonstrate how the order of the Assessing Officer is erroneous. Simply, observing by the Learned PCIT that the Assessing Officer has not made any enquiry on the issue is not sufficient and he is required to demonstrate error in the order of the Assessing Officer after going through reply of the assessee or after carrying out inquiries which are deemed fit. 6.3 We find that in the instant case, the Learned PCIT has held the assessment order as erroneous and prejudicial to the interest of the Revenue that no inquiries have been carried out by the Assessing Officer on following issues. 1. Difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted copy of ledgers. No bank account statements or copy of ITR of the lenders has been submitted. Hence. unsecured loan of ₹ 2,95,26,933/- remained unexplained. The AO is directed to verify these unsecured loans and take appropriate actions as per the relevant provisions of Income Tax Act. iii) Creditors and Debtors In response to questionnaire the assessee submitted list of creditors and debtors. However, the list contained only name of creditors and debtors. No address or PAN were provided. The AO did not make any independent verification about the genuineness of creditors nor did assessee submit confirmations from the creditors and debtors. During the present proceedings also the assessee did not submit confirmations of creditors and debtors. Hence, the same remain unverified. The AO is directed to verify these creditors and debtors and take appropriate actions as per the relevant provisions of Income Tax Act. 6.6 In the first issue of discrepancies in the revised and original audit report, the learned Counsel of the assessee has referred to various pages of the paper-book and shown to us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee before the Learned PCIT that the information in respect of claim of the depreciation, unsecured loans and sundry creditors in prescribed perform were duly filed by the assessee. The paper book page 116 is a copy of query letter issued by the Assessing Officer on 17.10.2017. In the said query letter, he has inquired about confirmation of unsecured loans and also inquired as why there was increase in interest on unsecured loans. The reply of assessee in respect of the above query raised by the AO is placed on Page 118 of the Paper-book. In said reply, the assessee has complied the direction of the AO and even justified reasons for increase in interest on unsecured loan. Moreover, in the year under consideration, loan was added in case of Sh. B.K. Gupta, Sh. K.L. Gupta, Sh. N.K. Gupta and Sh. Tanuj Datta. All these persons are either director or relative of director and assessed under the same Assessing Officer, and thus all information in respect of these parties were already available with the AO and he was not required to call for such information from the Assessing Officer. Similarly, for verification of ledger accounts of sundry creditors, books of accounts alongwith vouche ..... X X X X Extracts X X X X X X X X Extracts X X X X
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