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TMI Blog2025 (2) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered opinion that it is not a case of no enquiry and as a matter of fact, it was specifically brought to the notice of the AO that the interest earned was adjusted against the project expenditure
We find substance in the claim of the AR that now when the very genesis of the impugned addition made by the A.O u/s. 143(3) r.w.s. 263 of the Act, dated 28.12.2018 i.e. the order passed by the Pr. CIT u/s. 263 of the Act, dated 30.03.2018 had been quashed and does no more survive, therefore, the impugned order passed by the A.O u/s. 143(3) r.w.s. 263 has to meet the same fate and is liable to be quashed. We, thus, in terms of the aforesaid observations, set-aside the order of the CIT(Appeals) and vacate the addition made by the A.O vide his order passed u/s. 143(3) r.w.s. 263. X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company had filed its return of income for A.Y.2013-14 on 30.03.2014, declaring an income of Rs. Nil. The Return of income filed by the assessee was initially processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. Original assessment was framed by the A.O vide his order passed u/s. 143(3) of the Act, dated 31.03.2016 accepting the returned income as such. 3. The Pr. CIT, Bilaspur after culmination of the assessment proceedings called upon the assessee company to put forth an explanation as to why the assessment order passed by the A.O u/s. 143(3) of the Act, dated 31.03.2016 may not be revised, for the reason, that the A.O had without carrying out any verification summarily accepted the assessee's claim of having received during the year under consideration genuine share application money of Rs. 1.65 crore (out of Rs. 2.35 crore) from M/s. Sakshi Real Estate Pvt. Ltd. As the Pr. CIT did not find favour with the explanation of the assessee company, therefore, he vide his order passed u/s. 263 of the Act, dated 30.03.2018 set-aside the assessment order with a direction to the A.O to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Real Estate Pvt. Ltd. (as was filed by the investor company in the course of the assessment proceeding) carries sanctity not only as regards the latter's existence but also the genuineness of its business transactions. 11. Be that as it may, we are of the considered view that it is not a case where the A.O had failed to carry out any enquiry, but as observed by the Pr. CIT in the body of his order it could be a case of inadequate enquiry on the issue in hand. We are of the considered view that now when the A.O on the basis of his exhaustive verifications, examination and deliberations on the solitary issue, i.e., large share application money received against unallotted shares which had formed the very basis for selection of the assessee's case for limited scrutiny, had arrived at a possible and plausible view and accepted the claim of the assessee of having received genuine share application money from the investor company, viz. M/s. Sakshi Real Estate Pvt. Ltd., therefore, the Pr. CIT in the garb of powers vested with him under Sec. 263 of the Act could not have sought for substitution of his view as against that arrived at by the A.O. On a careful perusal of the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction by the Pr. CIT u/s. 263 of the Act. 12. Coming to "Explanation 2" to Sec. 263 as had been made available on the statute vide the Finance Act, 2015 w.e.f 01.06.2015, the same in a way expands the scope of the term "erroneous" as provided in the statutory provision. Ostensibly, the rationale for inserting the "Explanation 2", specifically clause (a), was to render the assessment orders which had been passed without making inquiries or verification, which should have been made, amenable for revision under the said statutory provision. Undeniably the A.O had in the course of the assessment proceedings examined and verified at length the solitary issue on the basis of which the case of the present assessee before us was selected for limited scrutiny, i.e., large share application money received against unallotted shares. Only after deliberating at length on the information collated both from the assessee and u/s 133(6) from the investor company, the A.O by accepting the assessee's claim of having received genuine share application money under consideration had arrived at a possible and a plausible view. Albeit the "Explanation 2" in a way expands the scope of the term "errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said documentary evidence. Also, the A.O on verifying as to why shares were not allotted against the share application money was specifically informed by the investor company that as it had certain dispute with the assessee company on the issue of the price at which the shares were to be subscribed, therefore, for the said reason those could not be allotted even after receipt of share application money. In fact, as observed by us hereinabove the director of the investor company, viz. Shri. Sachin Verma in the course of the assessment proceedings had appeared in person before the A.O and confirmed the transaction in question and had also placed on record supporting documentary evidence a/w a copy of the assessment order which was passed in the case of the investor company u/s. 143(3) of the Act, dated 22.03.2016 for the year under consideration i.e A.Y.2013-14 by the ITO, Ward-5(1), Kolkata. Considering the aforesaid exhaustive deliberations of the A.O qua the supporting documentary evidence which were placed on his record during the course of the assessment proceedings, we have no hesitation in observing that the A.O had after necessary examination and verification on the issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck of inquiry" such course of action was open. For the sake of clarity the relevant observations of the Hon'ble High Court are culled out as under: "10.1. The fact that the AO has not given reasons in the assessment order is not indicative, always, of whether or not he has applied his mind. Therefore, scrutiny of the record, is necessary and while scrutinising the record the Court has to keep in mind the difference between lack of enquiry and perceived inadequacy in enquiry. Inadequacy in conduct of enquiry cannot be the reason based on which powers under Section 263 of the Act can be invoked to interdict an assessment order. The observations made in this behalf, by the Division Bench of this Court, in Commissioner of Income-tax vs. Sunbeam Auto Ltd., [2010] 189 Taxman 436 (Delhi)/[2011] 332 ITR 167 (Delhi) being apposite, are extracted hereafter. "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [See : Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ****** 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 263 of the Act, the Hon'ble High Court in the case of M/s Brahma Centre Development Pvt. Ltd. (supra) while approving the order of the Tribunal had, inter-alia, observed that as the A.O in the case before them while framing the assessment had conducted enquiry on the issue involved and arrived at a possible view, therefore, the Pr. CIT could not have assumed jurisdiction u/s 263 of the Act. The Hon'ble High Court in the said case was, inter alia, seized of the following issue : "i. Was there an enquiry carried out by the AO [and for this purpose, for the moment, we are assuming that Clause (a) and (b) of Explanation 2 appended to Section 263 of the Act would apply to the AYs in issue? Answering the aforesaid issue in the backdrop of Clause (a) and (b) of "Explanation 2" to Sec. 263 as was canvassed by the department, the Hon'ble High Court while approving the order of the Tribunal had held that as it was not a case of no enquiry and necessary verifications were carried out by the A.O, therefore, the order could not have been revised by the Pr. CIT under Sec. 263 of the Act, observing as under: "9. Having regard to the aforesaid documents, it cannot be said that the enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rarily parked the funds in FDRs, which earned interest. The assessee, therefore, submitted that in this way, such an interest has intrinsic nexus with the Real Estate Projects undertaken and therefore, they have adjusted the same against the project expenditure. The ld. AR submitted that the proceedings u/s. 148 were dropped. 12. In view of the above, we find it difficult to agree with the ld. DR that there was no enquiry conducted by the Ld. Assessing Officer by putting any specific question to the assessee as to the treatment given to the interest. As a matter of fact, the reason for the difference in the amount as per Form 26AS and ITR was due to the interest received from the banks that was duly accounted and considered in the financial statements of the company and was adjusted against the project expenditure. The very fact that pursuant to the scrutiny when the Ld. Assessing Officer proposed charging the interest amount received to tax, the very same explanation was offered by the assessee and was accepted by the Assessing Officer. We are, therefore, of the considered opinion that it is not a case of no enquiry and as a matter of fact, it was specifically brought to the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court vide its order passed in appeal in TAXC No.64 of 2023, dated 10.12.2024 had dismissed the appeal of the revenue as the "tax effect" therein involved as per CBDT Circular dated 17.09.2024 was less than the threshold limit of Rs. 2 crore prescribed for filing of appeals by the revenue before the High Courts, Page 51 of APB. 6. Thereafter, the A.O framed the assessment vide his order passed u/s. 143(3) r.w.s. 263 of the Act, dated 28.12.2018, wherein giving effect to the direction of the Pr. CIT, Bilaspur, he had after making an addition of Rs. 65 lacs determined income of the assessee company at the same amount. 7. On appeal, the CIT(Appeals) vide his order dated 19.11.2024 had dismissed the appeal filed by the assessee for want of prosecution. 8. The assessee company being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. 10. Shri Veekaas S Sharma, Ld. Authorized Representative (for short 'AR') for the assessee, at the threshold of hearing submitted that as the order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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