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TMI Blog2025 (1) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... al, CA For the Respondent : Ms. Baljeet Kaur, CIT DR ORDER PER MADHUMITA ROY, JM: The assessee has come up in appeal against the order dated 20.03.2024 passed by the Ld. PCIT, Central -1, Delhi, under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') whereby and whereunder the assessment order passed by the AO Central Circle- 3, Delhi found to be erroneous and in so far as it is prejudicial to the interest of revenue and further that the income of the assessee has been enhanced by Rs. 79,34,636/- for Assessment Year 2018-19 with a direction upon AO to recomputed the total income of the assessee for AY 2018-19. 2. Heard both the parties and perused the materials on record. Brief facts leading to the case are that the assessee, a private limited company filed its return of income on 29.03.2019 declaring total income at Rs. 26,55,680/- for the year under consideration assessment whereof was completed under Section 143(3) of the Act upon accepting the same. Subsequently, show cause notice dated 26.02.2024 was issued by the PCIT Central-1, Delhi on the issue that though the assessee made investment in equity shares as reflected from the balance sheet bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be held to be erroneous only upon invocation of Explanation 2 of Section 263 of the Act which cannot be applied at all as submitted by the Ld. A.R. In this regard, he has relied upon the judgment passed by the Hon'ble Delhi High Court in the case of PCIT Vs. Indian Farmers & Fertilizers Co-operative Ltd. in ITA No. 597 of 2017. Keeping in view the judgment passed by the Hon'ble Supreme Court in different matters including in the matter of Maxopp Investment Limited Vs. CIT, reported in 402 ITR 640 (SC) that in the absence of exempt income no disallowance under Section 14A of the Act is called for as was the crux of the argument advanced by the Ld. A.R. On the other hand, the Ld. D.R relied upon the order passed by the authorities below. 10. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. We find that the assessee was issued specific queries by and under the notice under Section 142(1) dated 16.01.2020 (Pages 40 to 43 of the PB) in regard to the application of Section 14A in the case of the assessee, the contents whereof is as follows: Government of India Ministry of Finance Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the 1.T. Act may not be made as per Rule 8D of I.T. Rules You are requested to explain all the issues as discussed above and provide detailed clarifications on all the above issues along with documentary evidence Further, for A Y. 2018-19, you are also requested to 1. Power of Attorney in favour of the Authorized Representative 2. Tax audit report and particulars of Balance Sheet and P/L account for the A.Y. 2018-19 with all annexures and schedules. 3. Copy of complete set of income tax returns in prescribed form along with computation of income & Acknowledgement for the A.Y. 2018-19 4. Copy of Form 26AS in support of taxes paid (Advance & self assessment tax) and TDS credit claimed in return along with reconciliation of receipts as per the form with those shown in income of the A.Υ. 2018-19 5. Brief note on the source of income of the assessee and detail of business activities carried out if any during the year and method of accounting followed during the F.Y. 2017-18. In case of deviation in method of accounting, please mention and give. 6. Please furnish all addresses where offices / godowns are situated Also give details of ownership of such propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had paid Rs 10,689/ as interest during the relevant assessment year. 1.1 As regard Your Honour's query regarding details of source of investment, the source of investments in various unquoted equity/preference shares during the relevant Assessment Year, which is tabulated below:- Sr. No. Particulars Amount (Rs.) 1. 500 Unquoted equity Shares of Marvelous Cement Private Limited purchased from Aayushi Credit and Capital Services Limited during the relevant Assessment year 2,45,500/- 2. 500 Unquoted equity shares of Marvelous Cement Prviate Limited purchased from Shri Raj Investments & Finance Limited during the relevant Assessment year. 2,45,500/- 3. 500 Unquoted Equity Shares of Remarkable Consumer Electronic Private Limited from Aayushi Credit and Capital Services Limited during the relevant Assessment Year 2,96,500/- 4. 500 Unquoted Equity Shares of Remarkable Consumer Electronic Private Limited from Shri Raj Investments & Finance Limited during the relevant Assessment Year 2,96,500/- Grand Total 10,84,000/- In this connection, copy of the relevant bank statement reflecting the payment made during the relevant Assessment Year are enclosed herewith. 1.2 A ..... 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Assessee Company, it is submitted that the Assessee Company is engaged in the business to carry on the business / profession of consultants / suppliers/ providers of all types of man power such as contractual, skilled / unskilled, trained labour / staff /managerial personnel and act as employment agent and recruitment agent and placement of all kind of personnel including managers, professionals, executives, skilled, semi-skilled, un-skilled workers, labourers & other technical personnel in India and abroad And to provide man power for industry and labour contractors, for security services, security guards, body guards and to provide training to security personals guards, industrial labour / manpower And constitute, promote, subsidise, organise and assist or aid in forming, constituting, promoting, subsidising, organising and assisting or aiding any Company or Companies of all kinds, for the purpose of acquiring all or any of the property. rights and liabilities of this Company or for carrying on any business which this Company is authorised to carry on or for any other purposes which may seem directly or indirectly calculated to benefit this Company or to promote or advance the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fertilizers Cooperative Ltd. in ITA No. 597/2017. While dealing with this particular aspect of the matter. the Hon'ble Court has been pleased to observe as follows: "10. As regards the issue concerning the capitalization of interest, the Court finds again that the ITAT took note of the fact that detailed enquires were made by the AO in regard to the major additions to the fixed assets, capital work in progress, the manner in which the depreciation was claimed and the details of both secured as well as unsecured loans. The audited financial statements of the Assessee were also compiled, for the earlier AYs including the AY in question, and placed before the AO. The ITAT also took note of the Significant Accounting Policies in the Auditor's Report and the synopsis filed before the AO. It is only after such an elaborate exercise that it was concluded by the ITAT in the impugned order as under: "16. We have carefully considered the submissions and arguments made by the learned counsel of the assessee as well as the learned CJT(O.R.) and heard both the parties at length. We find that the Assessing Officer had made detailed inquiries and examined the entire block of fixed assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Mr. Manchanda that the ITAT failed to note the changed position as a result of the insertion of Explanation-2 in Section 263 of the Act with effect from 1" June, 2015. However, on this aspect, the ITAT has specifically held in para 17 of the impugned order as under: "17. Before concluding we would also like to deal with the recent insertion, of Explanation 2 to Section 263 of the Act. We have already held above that in respect of both the issues i.e. allowing credit of deemed taxes paid on dividend in Oman as well as capitalization of interest u/s 36 (1) (iii) detailed enquiries as well as verification have been made by the AO. Further it is also not the case of the Ld. Pr. CIT that the order is not in accordance with any instruction direction issued by the Board or is not in accordance with any decision of Hon'ble Delhi High Court or the Apex Court of India. Accordingly the order passed by the AO cannot be regarded as deemed to be erroneous or prejudicial to the interest of the Revenue under Explanation 2 of the Act." 12. For the above reasons, this Court is of the considered view that no substantial question of law arises for consideration from the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with law and make a certain assessment, the same cannot be branded as erroneous simply because the order should have been written more elaborately. The expression erroneous refers to an error, in computation applying the relevant law or facts, or selecting a number which would govern the factual situation and moreso, arbitrary exercise and quasi judicial power is certainly not mandated within the scope of Section 263. Provision of Section 263(1) cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. Furthermore, both the conditions i.e order being erroneous and prejudicial to the interest of revenue could be specified simultaneously and conjunctively. If one of the conditions is not satisfied the order cannot be the subject matter of any revisionary proceedings. The said interpretation and position of law is not only clear from a plain and basic reading of the said section but also has been emphatically upheld by the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT, reported in (2000) 243 ITR 83 (SC) also relied upon by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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