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TMI Blog2023 (12) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO as per explanation 2(a) to sec. 263, such an assessment order is deemed to be erroneous so as to be prejudicial to the interest of the Revenue. Once that is so, the question does not arise whether the order of assessment was just erroneous and not prejudicial to the interest of the Revenue or just prejudicial to the interest of the Revenue but not erroneous.This interplay application of the provision becomes irrelevant when the said deeming provision is applied. Also if the AO had conducted enquiry regarding the disputed issues, then the argument of the ld.AR would have carried some weight as to whether the assessment order was just erroneous and not prejudicial to the interest of the Revenue. In such scenario also, the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed expenses of Rs. 37,665/- on account of interest on TDS. However, the assessee has not added back the same while computing its total income nor the Assessing Officer (AO) has disallowed the same in the assessment order. Since, the interest on TDS is not allowable as deduction u/sec. 37(1), the same was required to be disallowed. That, further on perusal of the financial statements submitted by the assessee, it was noticed that the assessee firm had undertaken a project called Sukhwani Pacific , which was under construction during the year under consideration. As per the profit loss account, the assessee firm has shown total sales of Rs. 20.17 crores and closing stock of Rs. 20.51 crores. Further, vide submission dated 31/01/2020, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings. The AO has failed to call for the relevant details in respect of disallowance of interest paid on TDS and applicability of deemed rent on unsold flats. There is a categorical mention in the order of the PCIT that as per the record, it is obvious that no examination on these issues were conducted by the AO who has also not raised any query in this regard. There was complete non-application of mind on the part of the AO and, therefore, the assessment order passed by the AO was erroneous insofar as prejudicial to the interest of the Revenue. 4. At the time of hearing, ld.AR for the assessee submitted that in order to invoke revisionary jurisdiction u/sec. 263, the PCIT must satisfy twin conditions laid down in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction cannot be invoked. 5. We have considered the submissions of the parties, assessment order as well as order passed u/sec. 263 of the Act. 5.1 That, upon examining the facts and circumstances involved in this case as enshrined in the aforesaid paras, we agree with the order of the PCIT passed u/sec. 263 of the Act. It is correct that the AO has failed to carry out any enquiry or examination regarding the issue of interest paid on TDS and the applicability of deemed rent on the unsold flats. Explanation 2 to sec. 263 is very precise and clear that For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y regarding the disputed issues, then the argument of the ld.AR would have carried some weight as to whether the assessment order was just erroneous and not prejudicial to the interest of the Revenue. In such scenario also, the issue of satisfaction by the PCIT would have been relevant, but in the instant case when in the threshold itself, the AO has failed to do his duty in conducting and verifying the issues involved, then in such situation, explanation 2(a) to sec. 263 as clearly stated as a deeming provision that such an assessment order passed shall be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue shall apply. We do not find, therefore, any infirmity with the order passed by the ld. Pr. CIT which is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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