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TMI Blog2024 (11) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to the revision order, AO has not made any addition after due verification. As relying on Clix Finance India (P.) Ltd. [ 2024 (3) TMI 157 - DELHI HIGH COURT] we are inclined to observe that the AO has duly verified various issues raised by the ld. PCIT and he has taken one of the possible views. Now ld. PCIT has invoked Explanation 2 to section 263 of the Act with a view that AO has passed the order without making an enquiry or verification, is not justified as per various documents submitted before us. Thus, we are inclined to set aside the order passed u/s 263 - Assessee appeal allowed. - Shri S. Rifaur Rahman, Accountant Member And Shri Sudhir Pareek, Judicial Member For the Assessee : Shri Abhishek Jain, CA For the Revenue : Shri Javed Akhtar, CIT DR ORDER PER S. RIFAUR RAHMAN, AM : 1. This appeal is filed by the assessee against the order of ld. Principal Commissioner of Income-tax, Delhi-1 (hereinafter referred to ld. PCIT ) dated 31.03.2021 for Assessment Year 2016-17. 2. Brief facts of the case are, assessee filed its return of income on 29.09.2016 declaring a loss of Rs. 32,48,76,393/-. The case was selected for complete scrutiny under CASS. The assessment was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, as per Schedule 20 i.e. Consumption of Wine and Liquor, it is noticed that the same is as under: FY 2015-16 FY 2014-15 Consumption of Wines and Liquor 682.98 lakhs 597.85 lakhs From the above, it is noticed that the consumption of Wine and Liquor in the current year is increased by Rs. 85 Lakhs but the sale is stated to be reduced by Rs. 223.31 Lakhs, which is possible only if there is drastic all in prices of wine liquor but the same is nowhere been mentioned in the replies of the assessee company and same is also not examined by the then AO. Hence, taking proportionate ratio of consumption to sale of FY 2014-15, the revenue that should have been generated from Sale of Wine and Liquor in FY 2015-16 would have been at Rs. 2460.06 Lakhs. Thus, Sale of wine and liquor is shown less by Rs. 529.94 Lakhs. However, this issue has not been examined in details by the then AO at the time of assessment proceedings. vi. As per the computation of Income, the assessee company has claimed deduction u/s 438 of the Income-tax Act, 1961 of earlier years amounting to Rs. 34,67,86,614/-. However, the correctness of same appears to have not been verified by the then AO at the time of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selected for scrutiny was examined by the AO during the assessment proceedings and assessee also submitted reply vide letter dated 04.09.2018 and further other issues were either explained during assessment proceedings were not asked for by the AO but can be easily explainable. After considering the above submissions, ld. PCIT observed that large increase in sundry creditors and reduction in business income as compared to preceding year, gross total income is less than the value of foreign remittances, large business loss set off against them other heads of income, large cash payments were made for credit card purchases and low income from TCS receipts. Ld. PCIT has discussed this aspect in his order and observed that the assessee has submitted cryptic reply and AO has accepted without making any enquiry in unusual circumstances as discussed in his order and came to the conclusion that the assessment order passed by the AO is without making required enquiries and verification. Accordingly, he invoked Explanation 2 to section 263 of the Act and the AO was directed to make fresh investment de novo in terms of the above observations in the order passed u/s 263 of the Act. 4. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that the issues raised by ld. PCIT and which were already verified by the AO during assessment proceedings and in the chart, assessee has indicated various notices issued by the AO on specific issues raised by ld. PCIT and the response submitted by the assessee for various queries raised by the AO. For the sake of clarity, the same is reproduced below :- S.No. Issues Raised Comments of CIT Date of Notice in which issue was asked during 143(3) Date of Response to the issue 1 Large increase in Sundry creditors and reduction in business income as compared to preceding year This issue was raised by the then A.O. during assessment but genuineness and creditworthiness of the sundry creditors was not verified at the time of assessment proceedings. No proper examination was made to identify the veracity of showing large increase in sundry creditors. Notice dt. 05.01.2018 (Pg.no.22, Query-17) and Notice dt. 16.08.2018 (Pg.no.24, CASS Reason e), (Pg.No.26, Query 22) Reply dt. 22.03.2018 (Pg.no.31, Q.no.17) Reply dt. 04.09.2018 (Pg.no.35, Point-e) Reply dt. 29.10.2018 (Pg.no.51, Q.no.22) And Reply dt. 13.11.2018 (Pg.no.56, Point no.1) 2 Gross total income is less than the value of foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.11.2018 (Pg.no.58) 10 Reporting Net Profit as NIL in Form 3CD making TAR Defective - Notice dt. 16.08.2018 (Pg.no.24, CASS Reason g) Reply dt.04.09.2018 (Pg.no.36, Point-g) 11 Stamp value of Kolkata Property Rs. 130,90,91,035/- whereas sale consideration is Rs. 80,61,00,000/- (TDS deducted on Rs. 80,61,00,000/-) Cost of Property 63,24,17,825/- Cost of Improvement Rs. 8,20,640/- Transfer Expenses Rs. 12,64,82,507/- 1. The A.O. did not verify whether TDS is deductible on Rs. 130,90,91,035/- or on Rs. 80,61,00,000/- 2. The A.O. did not verify as to how the expenses of Rs. 12,64,82,507/- approx. 20% of cost price) can be incurred on such transfer. Notice dt. 16.08.2018 (Pg.no.24, CASS Reason d) (Pg.no.25, Query - 1) Reply dt.04.09.2018 (Pg.no.35, Point-d) And Reply dt.01.10.2018 (Pg.no.38, Q.no.1) 6. Further he submitted that ld. PCIT has raised 11 issues and out of 11 issues, 7th issue was not raised by the AO and rest of all the issues were called for details in the respective notices and the same was verified by the AO. With regard to issue no.7, ld. AR brought to our notice order passed u/s 143(3) read with section 263 of the Act dated 31.03.2022, in the above order giving effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) and Hon ble Delhi High Court considered the similar issue and adjudicated as under :- 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order. 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent-assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12.2004 and 06.01.2005. Thus, it is not a case where no enquiry whatsoever has been conducted by the AO with respect to the claims under consideration. However, this leads us to an ancillary question whether the mandate of law for invoking the powers under Section 263 of the Act includes the cases where either an adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect was discussed in the following manner (page 113) *** 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma [2010 SCC OnLine Del 838], wherein, it was held that once it is inferred from the record of assessment that AO has applied its mind, the proceedings under Section 263 of the Act would fall in the category of Commissioner having a different opinion. Paragraph 8 of the said decision reads as under:- 8. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this court. That being the position, the present case would not be one of lack of inquiry and, even if the inquiry was termed inadequate, following the decision in Sunbeam Auto Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly be prejudicial to the interests of the Revenue. 10. The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. (See Rampyari Devi Saraogi v. CIT [(1968) 67 ITR 84 (SC)] and in Tara Devi Aggarwal v. CIT [(1973) 3 SCC 482 : 1973 SCC (Tax) 318 : (1973) 88 ITR 323].) [Emphasis supplied] 26. 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