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TMI Blog2021 (11) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... ge increase in investment in unlisted equities during the year. iii) Low income in comparison to high loans/ advances/investment in shares. 2.2. He noted that during the year under consideration the assessee has invested in equity shares of the following companies which is hit by the provisions of Section 56(2)(viia) of the Income Tax Act, 1961 : Sl. No. Name of the company Amount 1. Aura Buildwell Pvt. Ltd 30,15,000/- 2. Bharti Containers Pvt Ltd 20,00,000/- 3. Bluebell Agencies Pvt Ltd 7,00,000/- 4. Dharmesh Textiles Ltd 25,00,000/- 5. Hitech Grain Pvtltd 1,72,15,500/- 6. Hyman and Marketing Pvt. Ltd 1,80,05,000/- 7. Natraj Capital Ltd 2,00,000/- 8. Shokeen Jewellpry Pvt Ltd 15,00,000/- 2.3. However, the A.O. during the course of assessment proceedings has not examined the issue of applicability of provisions of Section 56(2)(viia) of I.T. Act for basis of determination of Fair Market Value ["FMV"]. Similarly, the other reason for scrutiny was investment in unlisted equity shares during the year. However, although the A.O. has examined with regard to source of investment and income derived from this investment, however, the A.O. has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order dated 15.12.2017, it is seen that all such required elements are missing therein and it is not reflected if any enquiry relevant to the issue under consideration in the present proceedings has been conducted. The Ld. PCIT relying on various decisions held that since there was no enquires conducted by the A.O. on the issue of valuation of shares in terms of Section 56(2)(viia) read with Rules 11U/11UA of the Income Tax Rules the order passed by the A.O. without making any enquiry or verification which should have been done has made the order erroneous in so far as it is prejudicial to the interests of Revenue. He, therefore, set aside the order passed by the A.O. under section 143(3) of the I.T. Act, 1961 and directed him to pass necessary consequential order, after giving due opportunity of being heard to the assessee. 3. Aggrieved with such order of the Ld. PCIT the assessee is in appeal before the Tribunal by raising the following grounds : GROUNDS OF APPEAL 1. That in the given facts order of Ld PCIT passed u/s 263 of the Act is passed without authority of law and is ultra vires to the provisions of the Act including section 263 of the Act and is further based on non e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in assessment order sought to be revised at paragraph 3 of the assessment order that all requisite /necessary details relevant to issue of limited scrutiny selection were called for and duly examined which jurisdictional aspect has not been objectively appreciated by worthy Ld PCIT in impugned order passed u/s 263 thus impugned order passed u/s 263 is jurisdictionally defective and void ab initio. 5. That in the given facts order of Ld PCI T passed u/s 263 of the Act is passed without authority of law and is ultra vires to the provisions of the Act including section 263 of the Act as Ld PCI T has simply directed Ld AO to verify the share valuation aspect u/s 56(2)(viia) which verification on basis of available details could have been done at end of Ld PCIT ( with end result that no prejudice is caused to revenue) , thus impugned order passed u/s 263 without necessary verification made by Ld P CIT in face of available details on case records (these details showing no prejudice to revenue), is fundamentally flawed and defective. 6. That in the given facts order of Ld PCITpassed u/s 263 of the Act is passed without authority of law and is ultra vires to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers 7 to 16 of the order and submitted that the Hon'ble Delhi High Court in the said decision has held that the standard to be adopted while dealing with the issue as to whether or not an A.O. has carried out an enquiry or verification, all that the Court is required to ascertain is as to whether the A.O. applied his mind. The fact that the A.O. has not given reasons in the assessment order is not indicative, always, of whether or not he has applied his mind. He submitted that it has been held that inadequacy in conduct of enquiry cannot be the reason based on which powers under Section 263 of the I.T. Act can be invoked to interdict an assessment order. He submitted that it has further been held that the error should be one that is not debatable or a plausible view. Section 263 of the Act invests a power of revision in a superior officer and, therefore, by the very nature of the power, does not allow for supplanting or substituting the view of the A.O. The appreciation of material placed before the A.O. is, exclusively within his domain which cannot be interdicted by a superior officer while exercising powers under Section 263 of the Act only on the ground that if he had apprais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tradex Pvt. Ltd., vs., PCIT vide ITA.No.2999/Del./ 2017 dated 16.04.2018. 20. Order of ITAT, Delhi Bench in the case of Surya Financial Services Ltd., vs., PCIT [2018-TIOL-74- ITAT-DEL] Order Dated 08.01.2018. 21. CIT vs., Ashok Logani [2011] 347 ITR 22 (Del.). 22. Order of ITAT, Delhi Bench in the case of Pooja Gupta in ITA.No.4057/Del./2018 Dated 31.01.2019. 23. Shree Manjunathesware Packing Products & Camphor Works vs., CIT [1998] 231 ITR 53 [SC]. 24. Order of ITAT, Delhi Bench in the case of PTC Impex (India) Pvt. Ltd., vs., CIT vide ITA.,No.2860/ Del./2010 dated 03.04.2018. 5. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before me. We find the case of the assessee was selected for limited scrutiny for the following reasons : 1. Low income in comparison to very high investments. 2. Low income in comparison to high loans/ advances/investment in shares. 3. Large increase in investment in unlisted equities during the year. 5.1. We find the A.O. vide notice dated 142(1) dated 03.08.2017 has asked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission 14 Assessment Order u/s 143(3) passed 15-12-2017 This is the order sought to be brought under revisional jurisdiction 5.4. Further the submission of the Learned Counsel for the Assessee that limited scrutiny was never converted to full scrutiny could not be contradicted by the Ld. D.R. 5.5. We find a somewhat identical issue had come-up before the Hon'ble Delhi High Court in the case of PCIT vs., M/s. Brahma Centre Development Pvt. Ltd., (supra). In that case the order under section 143(3) was passed on 31.01.2017 and 27.09.2017 for the A.Ys. 2012-13 and 2013- 14 wherein the A.O. accepted the interest earned by the assessee against the fixed deposits were adjusted i.e., deducted from the value of the inventory and not credited to the P & L A/c. The Ld. PCIT noted that the Tax Auditor in the Report filed in Form No.3CD had observed that interest earned on fixed deposits pertain to "Other Income" and had not been credited to the P & L A/c. The interest earned on fixed deposits in A.Y. 2012-13 was Rs. 9,47,04,585/- whereas in A.Y. 2013-14, the interest earned on fixed deposits was Rs. 4,32,91,517/-. The Ld. PCIT invoking the powers under section 263 of the Act held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. In Gabriel India Ltd.'s case (supra), law on this aspect was discussed in the following manner : ". . . From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. ****** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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