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TMI Blog2022 (11) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. Further, if you go by the observations of the PCIT, it is abundantly clear that the PCIT has set aside the assessment order for further verification which in our considered view is not permissible u/s.263 of the Act, even after insertion of Explanation (2) to sec. u/s.263 - Therefore, we are of the considered view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue and thus, we quashed the order passed by the PCIT u/s.263. Appeal filed by the assessee is allowed. - ITA No. 213/Chny/2022 - - - Dated:- 4-11-2022 - SHRI V. DURGA RAO , HON BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA , HON BLE ACCOUNTANT MEMBER Appellant by : Mr. B. Ramakrishnan , CA Respondent by : Mr. AR. V. Sreenivasan , Addl. CIT ORDER PER G. MANJUNATHA , AM : This appeal filed by the assessee is directed against the order of the Principal Commissioner of Income Tax (Central), Chennai-2, dated 18.03.2022, passed u/s.263 of the Income Tax Act, 1961, and pertains to assessment year 2017-18. 2. The assessee has raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice dated 15.02.2022 was served on the assessee. In the said show cause notice, the PCIT has taken up the issue of payment made to M/s.Sun Med Health Care Pvt. Ltd., and purchase of medical equipments from said party on the ground that the assessee could not furnish necessary evidences including details of equipments procured from the parties. The PCIT had also questioned depreciation claimed on additional construction under the head building and observed that although, the assessee claims to have been made payment of Rs.4,02,90,104/- for repairs and renewals of building, but no proper evidence was filed to justify the claim. The PCIT had also taken up the issue of depreciation on building under construction and observed that no details like copy of estimate, approval obtained from local authority for construction, bills and vouchers relating to construction expenses, were furnished. Likewise, the PCIT had also questioned certain creditors appeared in the balance sheet in the name of parties and observed that, no evidence has been filed including confirmation from the parties to justify creditors shown in the books of accounts. Although, the assessee has not filed necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings, is sufficient ground for invoking sec.263 of the Act, as the order in such case is erroneous in so far as it is prejudicial to the interest of the Revenue and thus, rejected objection filed by the assessee and set aside the assessment order with a direction to the AO to examine the issue in light of explanation and pass order as per law. Aggrieved by the order of the PCIT, the assessee is in appeal before us. 7. The Ld.AR for the assessee submitted that the PCIT is erred in assuming jurisdiction u/s.263 of the Act, and set aside the assessment order without appreciating the fact that in order to exercise his powers conferred u/s.263 of the Act, the PCIT should explain how and why the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. The Ld.Counsel for the assessee referring to plethora of judicial precedents, including the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd., (supra) submitted that prejudicial to the interest of the Revenue u/s.263 of the Act, has to be read in conjunction with the expression erroneous order passed by the AO. In this case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. In order to assume jurisdiction u/s.263 of the Act, twin conditions must be satisfied viz., (i) the order of the AO must be erroneous and (ii) further, it should be prejudicial to the interest of the Revenue. Unless, twin conditions embedded therein, are satisfied, the PCIT cannot revise the assessment order u/s.263 of the Act. In this case, the PCIT has revised the assessment order on four issues right from payment made to M/s.Sun Med Health Care Pvt. Ltd., and purchases of medical equipments from them, depreciation on improvement to building, depreciation on building under construction and creditors appear in books of accounts of the assessee. The PCIT has discussed each and every issue in his show cause notice and observed that the AO has not carried out required enquiries, he ought to have been carried out in terms of Explanation (2) to sec.263 of the Act, inserted by the Finance Act, 2012 w.e.f. AY 2013-14. According to the PCIT, although, the assessee has not furnished complete details about those issues, the AO has completed u/s.144 r.w.s.153C of the Act, at the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, and the order in such case is erroneous in so far as it is prejudicial to the interest of the Revenue. In our considered view, the PCIT is grossly erred in setting aside the assessment order with one-line cryptic observation that the AO has not applied his mind on four issues without bringing on record, how the Revenue is prejudiced from those issues. Further, in the show cause notice also the PCIT has failed to give any plausible reasons as to how the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. From the above, it is clear that the PCIT has simply assumed jurisdiction and set aside the assessment order without satisfying himself about erroneous order passed by the AO, which caused prejudicial to the interest of the Revenue on four issues. 11. It is a well settled principle of law by the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra), where it has been held that the phrase prejudicial to the interest of the Revenue u/s.263 of the Act , has to be read in conjunction with the expression erroneous order of the AO. Further the Courts observed that every loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the Assessing Officer had not applied his mind to the issue. There are judgments galore laying dawn the principle that the Assessing Officer in the assessment order is not required to give detailed reasons 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. 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 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 . 12. In this case, on perusal of facts available on record, we find that four issues questioned by the PCIT in their show cause notice issued u/s.263 of the Act, has been thoroughly examined by the AO during the course of assessment proceedings, which is evident from notice issued by the AO and reply furnished by the assessee. Even during revision proceedings, the PCIT did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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