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TMI Blog2022 (10) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings on the ground that the AO has not made enquiries or verification which should have been made in respect of share capital introduced, unsecured loan raised during the year under consideration and claim of depreciation investment allowances under section 32AC of the Act. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, AO had made detailed enquiries and after consideration of material placed on record, accepted the claim of the assessee. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. Ground of appeal raised by the assessee is thus allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... made investment in the assessee company in form of loans. In some cases, the amount of loan and share capital were credited in the assessee book which was more than 100 time of the income declared by the investors/creditors. Likewise, the Ld. PCIT also found that the investors/creditors have also shown unsecured loan in their books which were utilized for making investment/advancing loan in the assessee company. However on verification of assessment record it was found that assessee has merely furnished copy of balance sheet and no other enquiry and verification was conducted by the AO as prescribed under section 68 of the Act. 5. The Ld. PCIT also found that assessee during the year shown has shown addition to fixed assets for Rs. 39,90,99,107 on which, it claimed depreciation of Rs. 6,25,34,642/- and additional depreciation u/s 32AC of the Act for Rs. 5,10,68,759/- only. On question by the AO, the assessee only furnished ledger copy without having supporting documents such as bills, voucher, installation and commissioning certificate. However, the AO allowed the claim of the depreciation without verifying supporting materials. 5.1 Thus, the Ld. Principal Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of verification of share capital, foreign remittance and sundry creditor. Against the notice under section 142(1) primary evidences like PAN, ROI, and bank statement were furnished and after verification of the same, the genuineness of the share capital & unsecured loan raised were accepted by the AO. 7.1 The ld. AR with regard to claim of depreciation and investment allowances under section 32AC of the Act submitted that in response to notice under section 142(1) of the Act, the assessee vide annexure -13 furnished complete details of assets purchased. The AO after verification of the same and considering the voluminous of data and being first year of e-assessment allowed the claim of the assessee. 7.2 The ld. AR in this regard drawn our attention to page no. 30 to 51 of the paper book where notices under section 142(1) of the Act dated 18-07-2018 and 11-09-2018 and their replies dated 11-09-2018 and 06-12-2018 are placed. The ld. Authorized Representative submitted that since all details were filed with the ld. Assessing Officer and assessment order was passed after consideration of all the materials, it cannot be said that the enquiries made were insufficient so as to just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man activity. 9.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO visà- vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue." 9.7 The Supreme Court in another recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revisional order making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed enquiries while allowing assessee's claim for deduction of business expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court's order was liable to be dismissed. The facts of this case were that in course of assessment, Assessing Officer allowed assessee's claim for deduction of certain expenditure on purchase of CDs on Jain Religion by expending an amount of Rs. 10.4 crores, after due examination. The Commissioner passed revisional order holding that Assessing Officer had not carried out any enquiries as to nature of expenditure being capital or not. The Tribunal, however, allowed assessee's appeal holding that Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The Hon'ble High Court upheld the order passed by the Tribunal. The Hon'ble Supreme Court on consideration of above facts held that SLP filed against High Court's order was liable to be dismissed. The Supreme Court made the following observations, while passing the order:- "It is by now well settled that, the Commissioner ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. In such a scenario, where the AO has rejected substantial amount from the claim of expenditure after reasonably verifying bills and vouchers, the allegation of the Pr.CIT appears misconceived. Ordinarily, it is only in a very gross case of inadequacy in inquiry and lack of application of mind that the order of AO is open to attack as erroneous. In the context of a turnover and scale of operation of this magnitude, the expenditure incurred on business advancement of such amount does not indicate any visible abnormality. This apart, the AO did take cognizance of the issue and made substantial disallowance. Thus, it cannot be outrightly alleged that the AO has omitted to apply its mind to the issue. The allegation thus appears unintelligible. The AO, in our view, has not committed any error in not chasing will of the wisp in the absence of any brazen circumstances. The action of the Pr.CIT on this issue of business advancement expenses appears to be guided by the considerations of Revenue alone and thus cannot be viewed with favour." 9.11 From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the end of the previous year under consideration. Details of unsecured loan square off during the previous year under consideration. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Copy of account of assets along with the proof regarding purchasing and disposal of any assets during the financial year under consideration. Reconciliation of the depreciation claimed and actually receivable as per the provision of sec.32(1) and income-tax rules. * Assessee reply dated 11-09-2018: 2 List of share holders of the Company along with details of their share holding copy of personal accounts of all the Directors and acknowledgment of returns of income filed by them. Furnish the source of new capital introduced by Directors, if any? Shareholder's List along with the shareholding pattern and documents pertaining to Directors are enclosed as per Annexure-2 3 Furnish the details of Authorized Capital, Subscribed and paid up capital furnish details of new share capital introduced during the year. Details of Authorized capital subscribed and paid capital is as per Annexure-3 4 Please explain the basis of charging of share premium vis-à-vis the N.A.V No s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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