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TMI Blog2016 (5) TMI 1569X X X X Extracts X X X X X X X X Extracts X X X X ..... f his powers u/s.263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue for the following reasons: 1. According to the CIT in the profit and loss account of the Assessee sundry income of Rs. 10,35,13,136/- was credited. According to the CIT the said item of income ought to have been considered as income falling under the head "Income from other sources" and not income under the head "Income from Business or Profession". According to CIT by accepting the said item of income as "Income from Profession", the book profit on which deduction of partner's salary was to be allowed u/s.40(b)(v) of the Act was allowed in excess by Rs. 3,68,36,524/-. Under the provisions of Sec.40(b)(v) of the Act, notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", in the case of any firm assessable as such, any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt on account of "Accountant Risked Policy Premium". This expenditure according to the CIT cannot be regarded as business expenditure allowable as deduction while computing income from profession. 4. According to the CIT the AO while completing the assessment did not take note of the aforesaid aspects and his failure to examine those points and his action in completing the assessment in a perfunctory manner rendered his order erroneous and prejudicial to the interest of the revenue. Accordingly, the CIT issued a show cause notice dated 6.3.2014 to the Assessee. After hearing the submissions of the Assessee, the CIT passed the impugned order wherein he held as follows: 1. On the sundry income of Rs. 10,35,13,136/- credited in the profit and loss account, the CIT was of the view that at the time of passing the original order u/s. 143(3) the then A.O. has not taken any details with respect to income from other sources and his order is also silent on this issue. The A.O. has simply treated this income as the business income. So even if he has rightly or wrongly treated this income as business income the aspect of giving benefit u/s. 40B should have also been seen in the light of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Aggrieved by the order of the CIT, the Assessee has preferred the present appeal before the Tribunal. We have heard the submissions of the learned counsel for the assessee and the learned DR. As already observed the jurisdiction u/s 263 of the Act has been exercised on the ground that the AO while completing the original assessment failed to make proper inquiries which he ought to have made before completing the assessment. It is in this background that the learned counsel for the assessee drew our attention to the inquiries made by the AO while completing the assessment on the issues considered by CIT in the impugned order u/s 263 of the Act. 7. As far as the sum of Rs. 10,35,13,136/- which was shown as sundry income in the profit and loss account is concerned, the AO vide letter dated Nil, (signed by the AO on 1-9-11) along with notice u/s.142(1) of the Act, called upon the Assessee to furnish certain details. Item No.20 of the list of details sought by the AO was the details with regard to "Sundry Income". The assessee vide its letter dated 25.10.2010 gave explanations and details as desired by the AO. Annexure-III to the said letter gives the break-up of sundry income cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and foreign currency gain or loss the learned counsel for the assessee submitted that there cannot be any dispute with regard to inclusion of the amounts credited on sale of scrap and recovery of old excess payment in the book profit. So also with regard to gain on account of exchange fluctuation which has to be regarded as income from profession. 9. Without prejudice to the above contentions, the learned counsel submitted that even if the non refundable grant is assumed to be assessable under the head 'income from other sources' as observed by the learned CIT, the same cannot be legally excluded while arriving at the 'book profit' as per Explanation 3 to section 40(b)(v) of the Act and in this regard placed reliance on the decision of the Hon'ble Kolkata High Court in the case of Md. Serajuddin & Brothers vs. CIT [210 Taxman 84 (Kol)] wherein it was held that on a proper construction of the provisions of section 40(b)(v) and Explanation thereto, book profit comprises the entire net profit as shown in the profit and loss account and not the profits and gains of business assessed under Chapter VI-D. 10. With regard to the payments made to PwC Global services o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Network Assurance Methodology Group etc. It was submitted by him that given the nature of services rendered by PwC Services BV to the Assessee, there cannot be any doubt that the expenses there for have been incurred by the Assessee wholly and exclusively for the purpose of its business or profession and is accordingly allowable as deduction u/s. 37(1) of the Act while computing the total income of the firm for the year under consideration. 12. It was submitted that all the said details including agreement were duly considered and examined by the Assessing Officer at the time of the assessment proceedings and having satisfied that the same has been incurred wholly and exclusively for the purpose of the business or profession carried on by the Assessee, he has allowed deduction of the same in computing the assessed income for the year under consideration. It was contended by him that issues which are accepted, do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/ disallowances are made. 13. The learned counsel for the assessee brought to our notice that in assessments completed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper details have been obtained by the AO. He has also observed that the AO ought to have called for necessary details and made necessary inquiries. According to him CIT has not set out as to what is the nature of inquiry that has to be carried out by the AO. The learned counsel for the assessee also drew our attention to the fact that similar expenditure had been allowed in the assessments of the assessee in the past. The details in this regard are as follows :- Assessment Years Insurer Name Order Reference Remarks 2005-06 Cholamandalam MS General Insurance Co.Ltd. National Insurance Co.Ltd. Original Assessment u/s 143(3) Reassessment u/s 143(3)/147 Allowed in both original and reassessment order as revenue expenditure. 2006-07 Cholamandalam MS General Insurance Co.Ltd. National Insurance Co.Ltd. Original Assessment u/s 143(3) Reassessment u/s 143(3)/147 Allowed in both original and reassessment order as revenue expenditure. 2007-08 Cholamandalam MS General Insurance Co.Ltd. National Insurance Co.Ltd. Original Assessment u/s 143(3) Allowed in original order as revenue expenditure. 2008-09 Cholamandalam MS General Insurance Co.Ltd. National Insurance Co.Ltd. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. We derive support for the proposition as stated above from the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises 99 ITR 375 (Del). 17. Since in the present case the CIT has exercised jurisdiction u/s.263 of the Act on the ground that the AO while completing the assessment proceeding did not make enquiries which he ought to have made, it is necessary to look into what enquiries the AO made on the issues raised in the order u/s.263 of the Act. It is clear from the submissions and material available on record with regard to the sundry income credited in the profit and loss account the AO made the required inquiries. Though there is no specific reference by the AO on this aspect, yet the fact remains that the AO got the details of the sundry income and in the absence of any adverse o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. In the result the appeal of the assessee in ITA NO.1277/Kol/2014 is allowed. ITA NO.1278/Kol/2014 19. This is an appeal filed by the assessee against the order dated 28.03.2014 passed by CIT,Kolkata-XIX, Kolkata relating to A.Y.2009-10. 20. The assessee in this case is a firm of consultants engaged in the profession of providing financial consultancy, audit and accounting services in India. The assessee in this case filed its return of income on 30.09.2009 declaring total income of Rs. 24,84,85,909/-. By revised return filed on 30.03.2011 the total income enhanced to Rs. 25,37,78,154/-. The AO by an order dated 28.12.2011 passed u/s 143(3) of the Act determining the total income of the assessee at Rs. 25,41,15,580/-. The CIT, Kolkta-XIX in exercising of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue. The reasons given for coming to the aforesaid conclusion was that the claim of the assessee for deduction of Rs. 2,13,90,329/- on account of service charges paid to Price water house Global services was not inquired properly by the AO. Another reason was that the assessee had claimed d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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