M/s. Amira Enterprises Ltd., New Delhi v. Pr. CIT (C), Gurgaon

ITA 3206/DEL/2017 | 2014-2015
Pronouncement Date: 29-11-2017 | Result: Allowed

Appeal Details

RSA Number 320620114 RSA 2017
Assessee PAN AAGCA5057J
Bench Delhi
Appeal Number ITA 3206/DEL/2017
Duration Of Justice 6 month(s) 7 day(s)
Appellant M/s. Amira Enterprises Ltd., New Delhi
Respondent Pr. CIT (C), Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-11-2017
Assessment Year 2014-2015
Appeal Filed On 22-05-2017
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BEN CH NEW DELHI BEFORE SHRI B.P. JAIN ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA JUDIC IAL MEMBER SA NO. 452/DEL/2017 & ITA NO. 3206/DEL/2017 [ASSESSMENT YEAR: 2014-15] M/S AMIRA ENTERPRISES LTD VS. THE PR.C.I.T 54 PRAKRITI MARG SULTANPUR FARMS CENTRAL MEHRAULI NEW DELHI GURGAON PAN : AAGCA 5057 J [APPELLANT] [RESPONDENT] DATE OF HEARING : 07.11.2017 DATE OF PRONOUNCEMENT : 29.11.2017 ASSESSEE BY : SHRI SALIL KAPOOR ADV REVENUE BY : SMT. APARNA KARAN CIT- DR ORDER PER B.P. JAIN ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.02.2017 PASSED BY THE CIT(A) - CENTRAL GURGAON FOR THE A.Y. 2014-15 U/S 263 OF THE INCOME TAX ACT 1961 (HEREINAFTER R EFERRED TO AS THE ACT FOR SHORT). 2 2. THE ASSESSEE IS IN THE BUSINESS OF TRADING OF RI CE. DURING THE YEAR UNDER CONSIDERATION I.E. A.Y. 2014-15 THE ASSESSE E FILED RETURN OF INCOME ON 25.11.2014 DECLARING INCOME OF RS. 32 21 460/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND A NOTICE U/S 1 43(2) DATED 18.09.2015 WAS ISSUED. THEREAFTER NOTICE U/S 142(1) ALONGWITH QUESTIONNAIRE WAS ISSUED ON 05.04.2016. THE APPELLA NT APPEARED ON VARIOUS DATES AND FILED THE REQUIRED DETAILS FROM T IME TO TIME. ASSESSMENT ORDER DATED 29.06.2016 WAS PASSED U/S 14 3(3) ACCEPTING THE RETURNED INCOME OF RS. 32 21 460/-. THE BOOKS OF AC COUNT AND VOUCHERS WERE PRODUCED AND EXAMINED BY THE ASSESSING OFFICER . 3. THE PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL ) [PCIT] GURGAON ISSUED NOTICE U/S 263 DATED 21.10.2016 SE EKING TO REVISE THE ASSESSMENT ORDER PASSED U/S 143(3). THE PCIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER WAS PASSED WITHOUT MAKING PROPER I NQUIRIES/ VERIFICATION/INVESTIGATIONS WHICH SHOULD HAVE BEEN MADE BEFORE ACCEPTING THE TRADING RESULTS/OTHER ISSUES AND THER EFORE THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE PCIT ISSUED SHOW CAUSE NOTICE U/S 263 IN RESPECT TO THE FOLLOWI NG ISSUES: 3 I. TRADING RESULTS ACCEPTED WITHOUT MAKING THOROUGH INQUIRY/INVESTIGATION AND GENUINENESS OF SALES/PURC HASES ACCEPTED WITHOUT ENQUIRING OR INVESTIGATING INDEPEN DENTLY II. AO HAS NOT EXAMINED DISALLOWANCE U/S 14A III. ALLOWABILITY OF FOREIGN TRAVEL EXPENSES NOT EXAMINE D BY THE AO IV. GENUINENESS OF GODOWN RENT NOT EXAMINED. 4. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESS EE SUBMITTED THAT THE ASSESSMENT ORDER IS NOT ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE AND ALSO THE ASSESSMENT HAS BEEN MADE AFTER MAKING INQUIRIES OR VERIFICATION ON ALL THE FACTS AS HAVE BEEN ALLEGED IN THE SHOW CAUSE NOTICE. THE ASSESSEE FILED DETAILED RESPONSE TO THE SHOW CAUSE NOTICE ISSUED U/S 263 OF THE ACT. 5. AS REGARDS THE TRADING RESULTS AND SALES/PURCHAS ES THE ASSESSEE CONTENDED THAT EXPLANATION FOR THE FALL IN GROSS PR OFIT AND NET PROFIT AND COMPLETE QUANTITATIVE DETAIL ALONG WITH VALUE OF OP ENING STOCKS PURCHASES AND SALES MADE DURING THE YEAR AND CLOSIN G STOCKS AT THE END OF YEAR BOTH IN QUANTITY AND VALUE WERE FURNISHED DURI NG THE ASSESSMENT PROCEEDINGS AND ALL THE SALES AND PURCHASES ARE FUL LY VOUCHED AND SUPPORTED BY INVOICES AND ALL THE PAYMENTS ARE THRO UGH ACCOUNT PAYEE 4 CHEQUES. VALUATION OF STOCKS FULLY SUPPORTED WITH D OCUMENTARY EVIDENCES AND DAY TO DAY STOCK RECORDS WERE FILED BEFORE BY T HE ASSESSEE BEFORE THE PCIT AND IT WAS SUBMITTED THAT THESE WERE PRODUCED BEFORE AO. 6. AS REGARDS THE GENUINENESS OF OPENING STOCK THE ASSESSEE SUBMITTED THAT THE STOCKS IN QUESTION WERE UNDER FINANCED FRO M BANK AND WERE UNDER PLEDGE WITH THE BANKS. IN SUPPORT OF THE SAME THE ASSESSEE FILED CONFIRMATION CERTIFICATES REGARDING FUNDS AVAILED A GAINST THE PLEDGED STOCKS. REGARDING THE ALLEGED DISCREPANCY IN SALES MADE DURING THE YEAR THE ASSESSEE SUBMITTED THAT SALES WERE MADE ONLY DU RING THE PERIOD WHEN RATES WERE FAVOURABLE. THE ASSESSEE SUBMITTED COMPL ETE PARTY WISE DETAIL OF PURCHASES AND SALES MADE DURING THE YEAR UNDER CONSIDERATION WITH CONFIRMED COPY OF ACCOUNT OF THE PARTIES GIVIN G DETAIL OF EACH AND EVERY INVOICE. THE ASSESSEE SUBMITTED THAT THESE DO CUMENTS WERE ALSO FURNISHED BEFORE THE AO. 7. AS REGARDS THE DISALLOWANCE U/S 14A OF THE ACT THE ASSESSEE SUBMITTED DISALLOWANCE U/S 14A IS NOT APPLICABLE TO THE COMPANY. WITH RESPECT TO THE ALLOWABILITY OF FOREIGN TRAVEL EXPEN SE AND GODOWN RENT THE ASSESSEE SUBMITTED COMPLETE DETAILS OF EXPENSES WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE LD. PCIT HEL D THAT THE ASSESSMENT 5 ORDER HAS BEEN PASSED WITHOUT MAKING PROPER INQUIRI ES/ VERIFICATION /INVESTIGATIONS WHICH SHOULD HAVE BEEN MADE BEFORE ACCEPTING THE TRADING RESULTS AND OTHER ISSUES AND THE SAME IS TH EREFORE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY VIDE ORDER U/S 263 OF THE ACT DATED 17.02.2017 THE LD. CIT(A) SET ASIDE T HE ASSESSMENT ORDER AND DIRECTED THE AO TO REDO THE ASSESSMENT DE NOVO AFTER MAKING NECESSARY INQUIRIES/VERIFICATION/ INVESTIGATIONS. AGAINST THE ORDER OF THE LD. PCIT U/S 263 OF THE ACT THE ASSESSEE HAS PREFE RRED THIS APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THE NOTICE ISSUED UNDER SECTION 263 BY THE PRINCI PAL COMMISSIONER OF INCOME TAX (CENTRAL) (HEREINAFTER R EFERRED TO AS PR CIT) AND THE ORDER PASSED UNDER SECTION 263 ARE ILLEGAL BAD IN LAW AND WITHOUT JURISDICTION. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE PR. CIT HAS ERRED IN LAW AND ON FACTS IN ASS UMING JURISDICTION IN PASSING THE ORDER U/S 263 MORE SO WH EN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IS NEIT HER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE PR. CIT HAS ERRED IN SETTING ASIDE THE ASSES SMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT BY THE ASSESS ING OFFICER 6 ON THE GROUND THAT NO DETAILED INVESTIGATIONS HAVE BEEN CARRIED OUT BY THE ASSESSING OFFICER. 4. THAT PCIT HAS ERRED ON FACT AND IN LAW IN NOT AP PRECIATING THAT THE REPLY IN SPECIFIC REFERENCE TO FALL IN GRO SS PROFIT AND NET PROFIT AS COMPARED TO EARLIER YEARS WAS INQUIRE D DURING THE ASSESSMENT PROCEEDING AND ALSO CONFIRMED BY PCIT WH ILE ISSUING SHOW CAUSE NOTICE U/S 263 OF THE ACT. 5. THAT THE PCIT HAS FAILED TO CONSIDER THAT THE AS SESSMENT AS FRAMED BY THE ASSESSING OFFICER WAS AFTER DUE APP LICATION OF MIND AND AFTER CONSIDERING THE DETAILED REPLIES ON VARIOUS DATES AS FILED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 6. THAT THE PCIT HAS FAILED TO APPRECIATE THAT DETA ILS OF EXPENSES WERE FILED AS REQUIRED BY THE AO AND THE AS SESSMENT ORDER HAS BEEN PASSED AFTER DUE APPLICATION OF MIND. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE PR. CIT HAS ERRED IN INVOKING THE PROVISION OF SECTION 263 IN REFERENCE TO DISALLOWANCE U/S 14A OF THE ACT WITH OUT APPRECIATING THAT ASSESSEE DID NOT EARN ANY EXEMPT INCOME DURING THE RELEVANT AY HENCE NO DISALLOWANCE WAS WA RRANTED U/S 14A OF THE ACT. 8. THAT THE ASSESSMENT ORDER PASSED AFTER DETAILED ENQUIRIES DOES NOT BECOME ERRONEOUS MERELY BECAUSE CIT FEELS TH AT FURTHER ENQUIRIES SHOULD HAVE BEEN MADE. HENCE THE NOT ICE 7 ISSUED U/S 263 AND THE ORDER PASSED U/S 263 IS ILLEGA L BAD IN LAW AND WITHOUT JURISDICTION. 9. THAT WITHOUT PREJUDICE THE PCIT HAS WRONGLY AND ILLEGALLY HELD THAT THE ORDER PASSED BY AO IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST WHEN NO INDEPENDENT ENQUIRY HAS BEEN MA DE BY PCIT. HENCE THE NOTICE ISSUED U/S 263 AND THE ORDER PASSED U/S 263 IS ILLEGAL AND BAD IN LAW. 10. THE WITHOUT PREJUDICE THE PCIT HAS EXCEEDED HIS JURISDICTION IN SETTING ASIDE THE ASSESSMENT ORDER A ND DIRECTING THE AO TO MAKE DE NOVO ASSESSMENT WHEN HIS NOTICE A ND THE ORDER PASSED IS LIMITED TO CERTAIN ISSUES ONLY. HENC E THE ORDER PASSED U/S 263 IS ILLEGAL AND BAD IN LAW. 11. THAT THE EVIDENCE FILED AND MATERIALS AVAILABLE ON RECORD HAVE NOT BEEN PROPERLY CONSTRUED AND JUDICIOUSLY INTER PRETED HENCE THE ADDITION/ DISALLOWANCE MADE IS UNCALLED FO R. 12. THE APPELLANT CRAVES LEAVE TO ADD TO ALT ER TO AMEND THE ABOVE GROUND OF APPEAL AT THE TIME OF H EARING. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE LD. PCIT IS NOT VALID AND NOT MAINTAINABLE IN L AW AS THE SAME HAS BEEN PASSED WITHOUT CONSIDERING THE SUBMISSIONS OF THE A SSESSEE FILED IN RESPONSE TO THE SHOW CAUSE NOTICE U/S 263. IT IS SU BMITTED THAT THE ORDER 8 PASSED IS IN VIOLATION OF PRINCIPLE OF NATURAL JUST ICE BECAUSE THE OBJECTIONS TO PROCEEDINGS U/S 263 OF THE ACT AND TH E SUBMISSIONS MADE IN RESPONSE TO NOTICE U/S 263 OF THE ACT HAVE NOT BEEN CONSIDERED AT ALL BY THE PCIT. IT IS SUBMITTED THAT THE PURPOSE OF A SHO W CAUSE NOTICE IS TO ENABLE THE PERSON AGAINST WHOM ACTION IS SOUGHT TO BE TAKEN TO DEFEND HIS CASE AND THE SAME RESTS ON THE PRINCIPLES OF NA TURAL JUSTICE. SERVING A SHOW CAUSE NOTICE IS NOT AN EMPTY FORMALITY AND THE REFORE THE PRINCIPLES OF NATURAL JUSTICE ARE NOT MET BY MERELY ISSUING A SHOW CAUSE NOTICE. THE PCIT HAS TO APPLY HIS MIND TO THE SUBMISSIONS MADE BY THE ASSESSEE IN RESPONSE THEREOF AND HAS TO DISPOSE OFF THE OBJECTI ONS RAISED BY THE ASSESSEE BEFORE ARRIVING AT A FINDING THAT THE ORDE R IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE JUSTICE. THEREFO RE THE PCIT HAS HIMSELF ERRED BY NOT ADHERING TO THE PRINCIPLES OF NATURAL JUSTICE AND IT IS TRITE LAW THAT ANY ORDER PASSED IN VIOLATION OF PRINCIPLE S OF NATURAL JUSTICE IS INVALID AND LIABLE TO BE QUASHED. 9. THE APPELLANT HAD FILED REPLIES BEFORE THE LD. P CIT DATED 03.02.2017 ALONG WITH SUPPORTING DOCUMENTS WHICH ARE PLACED A T PAGE 71 TO PAGE 420 OF THE PAPER BOOK IN RESPONSE TO THE SHOW CAUS E NOTICE DATED 21.10.2016 ISSUED BY LD. PCIT U/S 263. HOWEVER A P ERUSAL OF THE IMPUGNED ORDER U/S 263 OF THE ACT SHOWS THAT THE PC IT HAS NOWHERE 9 CONSIDERED THE SUBMISSIONS OF THE ASSESSEE MADE IN RESPONSE TO THE SHOW CAUSE NOTICE U/S 263. THIS ITSELF MAKES THE ORDER P ASSED U/S 263 OF THE ACT AS ILLEGAL AND BAD IN LAW. OPPORTUNITY OF BEING HEARD IS LITTLE MORE THAN SERVING A NOTICE ON ASSESSEE. IT IS NOT AN EMP TY FORMALITY. THE PCIT HAS NOWHERE IN ITS ORDER U/S 263 OF THE ACT RECORDE D THE EXPLANATIONS GIVEN BY THE ASSESSEE IN RESPONSE TO THE 263 OF THE ACT SHOW CAUSE NOTICE. PCIT HAS NOT EVEN LOOKED AT THE REPLIES FIL ED BY THE APPELLANT IN RESPONSE TO NOTICE U/S 263 OF THE ACT AND HAS PASSE D THE ORDER U/ 263 OF THE ACT. THEREFORE THE ORDER OF THE LD. PCIT IS PA TENTLY ILLEGAL BAD IN LAW AND THE SAME IS LIABLE TO BE QUASHED. 10. IT IS FURTHER ARGUED THAT THE ORDER IS PASSED A FTER MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. THE AO EXERCISING ITS QUASI-JUDICIAL POWER HAD ISSUED A DETAILED QUESTIO NNAIRE U/S 142(1) OF THE ACT WHICH WAS DULY ANSWERED BY WAY VARIOUS DETA ILS EXPLANATIONS AND LETTERS. COMPLETE BOOKS OF ACCOUNT DETAILS OF SALE S/PURCHASES SUPPORTED WITH DOCUMENTARY EVIDENCES WERE PRODUCED AND EXAMIN ED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT HA D APPEARED BEFORE THE AO AND FILED REPLIES HOWEVER THE LD. PCIT HAS COMPLETELY IGNORED THE DETAILED ENQUIRY CONDUCTED BY THE AO AND HAS T HEREFORE ERRED IN 10 EXERCISING JURISDICTION U/S 263 OF THE ACT IN RESPE CT OF THE ISSUES WHICH WERE ALREADY EXAMINED BY THE AO. 11. RELYING ON THE DECISION OF APEX COURT IN THE CA SE OF MALABAR INDUSTRIAL CO. LTD. V. CIT [(2000) 243 ITR 83] IT IS SUBMITTED THAT THE POWER OF CIT U/S 263 CAN ONLY BE EXERCISED BY THE P CIT WHEN THE TWIN CONDITIONS OF THE ORDER BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE ARE SATISFIED AND THE SAME CAN NOT BE EXERCISED TO SUBSTITUTE ITS OWN FINDING IN PLACE OF THE AO AND T HEREFORE THE PCIT CANNOT RE-EXAMINE THE ISSUES ALREADY INQUIRED INTO BY THE AO. RELIANCE IS ALSO PLACED ON THE BOMBAY HIGH COURTS DECISION IN THE CASE OF CIT V. GABRIEL INDIA LTD. [(1993) 203 ITR 108]. THE POWER U/S 263 IS TO BE EXERCISED IN THE CASE OF NO INQUIRY AND NOT IN TH E CASE OF INADEQUATE INQUIRY OR LACK OF INQUIRY WHEREAS THE CASE OF T HE ASSESSEE IS NOT EVEN A CASE OF LACK OF INQUIRY. 12. IT IS SUBMITTED THAT UNDER THE JURISDICTION U/S 263 OF THE ACT THE LD. PCIT HAS INITIATED REVISION PROCEEDINGS IN ORDER TO CARRY OUT FISHING AND ROVING ENQUIRIES IN THE MATTERS WHICH ARE ALREADY C ONCLUDED BY THE AO AND THEREFORE THE EXERCISE OF JURISDICTION U/S 263 OF THE ACT IS BAD IN LAW. THE LD. PCIT HAS ERRED IN EXERCISING JURISDICTION U /S 263 OF THE ACT WHEN 11 THE ISSUES RAISED THEREIN WERE ALREADY ENQUIRED INT O BY THE AO DURING THE ASSESSMENT PROCEEDINGS. THE AO HAD PASSED THE ASSES SMENT ORDER ONLY AFTER CONDUCTING DETAILED ENQUIRY ON VARIOUS ISSUES INCLUDING TRADING RESULTS ALLOWABILITY OF EXPENSE AND DISALLOWANCE U /S 14A OF THE ACT. THE ASSESSMENT ORDER IS PASSED AFTER DUE APPLICATION OF MIND THEREFORE THE IMPUGNED NOTICE AND ORDER U/S 263 OF THE ACT ALLEGI NG THAT PROPER AND ADEQUATE ENQUIRY WAS NOT MADE RENDERING THE ASSESS MENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IS ARBITRARY BASED ON CONJECTURE AND SURMISES. THE LD. PCIT HAS NOT GIVE N ANY FINDING AS TO HOW AND IN WHAT MANNER THE ORDER OF THE AO ON THE V ARIOUS ISSUES NOTED IN ITS ORDER U/S 263 OF THE ACT WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. PCIT HAS NOT MADE ANY ENQUIRY ON HIS OWN BUT SIMPLY DIRECTED THE AO TO MAKE FURTHER VERI FICATION AND EXAMINATION THEREFORE THE ORDER OF THE LD. CIT U/S 263 OF THE ACT DESERVES TO BE SET ASIDE. RECENTLY THE DELHI HIGH COURT IN THE CASE OF PCIT V. DELHI AIRPORT METRO EXPRESS PVT. LTD. [ITA NO. 705/2017] HAS CATEGORICALLY HELD THAT FOR THE PURPOSE OF EXERCISI NG JURISDICTION U/S 263 AND REACHING A CONCLUSION THAT THE ORDER IS ERRONEO US AND PREJUDICIAL TO THE INTEREST OF REVENUE THE LD. PCIT HAS TO UNDERT AKE SOME MINIMAL INQUIRY AND IN FACT WHERE THE LD. PCIT IS OF THE VI EW THAT AO HAD NOT 12 UNDERTAKEN ANY INQUIRY IT BECOMES INCUMBENT ON THE PCIT TO CONDUCT SUCH ENQUIRY. FURTHER IN PCIT V. MODICARE LIMITED [ ITA NO. 759/2017] DELHI HIGH COURT HAS FOLLOWED ITS DECISION IN INCOM E TAX OFFICER V. DG HOUSING PROJECTS LIMITED [343 ITR 329] DIT V. JYOT I FOUNDATION [357 ITR 388] AND PCIT V. DELHI AIRPORT METRO EXPRESS PVT. L TD. (SUPRA) TO HOLD THAT THE EXERCISE OF JURISDICTION U/S 263 OF THE ACT CAN NOT BE OUTSOURCED BY THE CIT TO THE AO AND THEREFORE THE CIT CANNOT DIR ECT THE AO TO PROVIDE DETAILS OF THE FACTS ON THE BASIS OF WHICH THE PROC EEDINGS U/S 263 COULD HAVE BEEN INITIATED. 13. IN THE INSTANT CASE THE LD. PCIT UNMINDFUL OF THE ENQUIRIES CONDUCTED BY THE AO DURING THE ASSESSMENT PROCEEDIN GS AND SUBMISSIONS MADE BY THE ASSESSEE IN RESPONSE TO NOTICE U/S 263 HAS MERELY OBSERVED THAT THE ASSESSMENT ORDER WAS PASSED WITHOUT MAKING PROPER ENQUIRIES AND IT IS A MATTER OF RECORD THAT PCIT HAS HIMSELF NOT UNDERTAKEN ANY ENQUIRY TO REACH A CONCLUSION THAT THE ORDER IS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE IN THE ABSEN CE OF ANY JUSTIFICATION FOR EXERCISE OF JURISDICTION U/S 263 THE ORDER OF PCIT PASSED U/S 263 IS LIABLE TO BE SET ASIDE. THERE IS DIFFERENCE BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IT IS FOR THE AO TO DECIDE TH E EXTENT OF ENQUIRY TO BE MADE AS IT IS HIS SATISFACTION AS WHAT IS REQUIR ED UNDER LAW. RELIANCE IS 13 PLACED ON THE DECISION OF CIT V. SUNBEAM AUTO LTD. [(2010) 332 ITR 167] WHEREIN HONBLE DELHI HIGH COURT HAS HELD THAT IF T HERE WAS ANY INQUIRY EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCC ASION TO THE COMMISSIONER TO PASS ORDER U/S 263 OF THE ACT MERE LY BECAUSE THE COMMISSIONER HAS A DIFFERENT OPINION IN THE MATTER AND THAT ONLY IN CASES WHERE THERE IS NO ENQUIRY THE POWER U/S 263 CAN BE EXERCISED. THE LD. PCIT CANNOT PASS THE ORDER U/S 263 OF THE ACT ON TH E GROUND THAT FURTHER/THOROUGH ENQUIRY SHOULD HAVE BEEN MADE BY A O. 14. IT IS SUBMITTED THAT EVEN THOUGH THERE HAS BEEN AN AMENDMENT IN THE PROVISIONS OF SECTION 263 OF THE ACT BY WHICH E XPLANATION 2 IS INSERTED W.E.F. 01.06.2015 BUT THE SAME DOES NOT G IVE UNFETTERED POWERS TO THE COMMISSIONER TO ASSUME JURISDICTION U/S 263 TO REVISE EVERY ORDER OF THE AO TO RE-EXAMINE THE ISSUES ALREADY EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE HONBLE MUMBAI ITAT HAS DEALT WITH EXPLANATION 2 AS INSERTED BY THE FINANCE ACT 2015 IN THE CASE OF NARAYAN TATU RANE V. INCOME TAX OFFICER [(2016) 70 TAXMANN. COM 227] TO HOLD THAT THE SAID EXPLANATION CANNOT BE SAID TO HAVE OV ERRIDDEN THE LAW AS INTERPRETED BY THE HONBLE DELHI HIGH COURT ACCORD ING TO WHICH THE COMMISSIONER HAS TO CONDUCT AN ENQUIRY AND VERIFICA TION TO ESTABLISH AND SHOW THAT THE ASSESSMENT ORDER IS UNSUSTAINABLE IN LAW. THE TRIBUNAL HAS 14 FURTHER HELD THAT THE INTENTION OF THE LEGISLATURE COULD NOT HAVE BEEN TO ENABLE THE PCIT TO FIND FAULT WITH EACH AND EVERY A SSESSMENT ORDER WITHOUT CONDUCTING ANY ENQUIRY OR VERIFICATION IN O RDER TO ESTABLISH THAT THE ASSESSMENT ORDER IS NOT SUSTAINABLE IN LAW SIN CE SUCH AN INTERPRETATION WILL LEAD TO UNENDING LITIGATION AND THERE WOULD NOT BE ANY POINT OF FINALITY IN THE LEGAL PROCEEDINGS. THE OPI NION OF THE COMMISSIONER REFERRED TO IN SECTION 263 HAS TO BE U NDERSTOOD AS LEGAL AND JUDICIOUS OPINION AND NOT ARBITRARY OPINION. 15. IT IS ARGUED THAT THE IMPUGNED ORDER U/S 263 SE EKS TO REVISE THE ASSESSMENT ORDER IN RESPECT OF THE ISSUES WHICH WER E ALREADY EXAMINED BY THE AO DURING ASSESSMENT PROCEEDINGS. THE APPELL ANT ALSO FILED A DETAILED CHART TO SUPPORT HIS ARGUMENTS I. ALLEGED NON-VERIFICATION OF PURCHASE AND SALES AND TRADING RESULTS OF THE ASSESSEE; GENUINENESS OF SALES/PURCHASES MAD E BY THE ASSESSEE IT IS SUBMITTED THAT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS SPECIFIC QUERY W.R.T. SALES AND PURCHA SES/TRADING RESULTS WAS MADE VIDE QUESTIONNAIRE DATED 05.04.201 6 ISSUED U/S 142(1) [RELEVANT QUESTION BEING 11 20 22 25] AND THE 15 ASSESSEE HAD FURNISHED CATEGORICAL REPLY TO THE SAM E ALONG WITH ALL THE REQUIRED DETAILS OF PURCHASE/SALES. CO NFIRMED COPIES OF ACCOUNTS WITH PAN NUMBERS FROM WHOM SALES AND PURCHASES WERE MADE WERE FILED BEFORE THE AO. THE SAID DETAILS ARE PART OF THE ASSESSMENT RECORD AND IT WA S ONLY AFTER EXAMINING THE SAID DETAILS THE AO HAD PASSED THE A SSESSMENT ORDER. II. FALL IN G.P. AND N.P. THE PCIT HAS ASSAILED THE ASSESSMENT ORDER ON THE G ROUND THAT THERE IS FALL IN G.P. AS WELL AS N.P. IT IS SUBMITT ED THAT THE AO VIDE QUESTIONNAIRE U/S 142(1) HAD EXAMINED THE SAID ISSUE BY A SPECIFIC QUERY [RELEVANT QUESTION BEING 16] AND THE ASSESSEE HAD FURNISHED ITS REPLY THERETO WHEREIN HE CATEGORI CALLY SUBMITTED THAT THE DECLINE IS ON ACCOUNT OF RECESSI ON IN EXPORT PRICE OF RICE/GLOBAL MARKET. III. DISALLOWANCE U/S 14A IN THE NOTICE ISSUED U/S 263 THE PCIT STATED THAT THE AO HAS NOT EXAMINED DISALLOWANCE U/S 14A. IT IS SUBMITTED THAT DURING 16 THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD STATED IT NOT RECEIVED ANY DIVIDEND/EXEMPT INCOME DURING T HE RELEVANT PREVIOUS YEAR. THE HONBLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. WINSOME TE XTILE INDUSTRIES LTD. [(2009) 319 ITR 204] HAS HELD THAT U/S 14A CAN BE MADE WHEN NO EXEMPT INCOME HAS BEEN EARNED BY TH E ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. HENCE T HERE HAS BEEN NO ERROR COMMITTED BY THE AO BY NOT MAKING ANY DISALLOWANCE U/S 14A. ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD VIDE ITS ORDER DATED 29.06.2016 CATEGO RICALLY SUBMITTED THAT THERE IS NO CLAIM OF ANY EXEMPT INCO ME U/S 14A HENCE THERE ARE NO INTEREST EXPENSE RELATING T O EXEMPT INCOME. THIS CLEARLY SHOWS THAT THE AO HAD CONDUCTE D AN ENQUIRY REGARDING THE ISSUE OF DISALLOWANCE U/S 14A AND THE SAME WAS DULY REPLIED BY THE ASSESSEE. THEREFORE I T IS NOT A CASE OF NO ENQUIRY WHERE THE PCIT CAN EXERCISE IT S JURISDICTION U/S 263 HENCE THE ORDER U/S 263 IS IL LEGAL BAD IN LAW AND WITHOUT JURISDICTION. 17 IV. FOREIGN TRAVEL EXPENSE/GODOWN RENT UNDER ADMINISTRA TIVE AND OTHER EXPENSES IT IS ARGUED THAT THE AO VIDE QUESTIONNAIRE U/S 142 (1) HAD SOUGHT THE JUSTIFICATION OF ALL THE EXPENSES WHICH WERE DEBITED IN THE PROFIT & LOSS ACCOUNT [RELEVANT QUESTION BEI NG 15] AND IN RESPONSE TO THIS THE ASSESSEE HAD FURNISHED COM PLETE DETAILS OF VARIOUS EXPENSES ALONG WITH THE LEDGER A CCOUNT WHEREIN ALL THE REQUISITE DETAILS WERE GIVEN. BOOKS OF ACCOUNT AND VOUCHERS WERE PRODUCED AND EXAMINED BY THE AO. THE DETAILS HAVE BEEN ASKED BY THE AO AND AS SUCH IT CA NNOT BE SAID THAT NO ENQUIRY WAS MADE. THE EXPENSES HAVE BE EN ALLOWED AFTER DUE EXAMINATION. RELIANCE WAS PLACED ON THIS HONBLE TRIBUNALS DECISION IN VODAFONE ESSAR SOUTH LTD. V. CIT ([2011) 12 TAXMANN.COM 233) WHICH IS FURTHER AFFIR MED BY THE HONBLE DELHI HIGH COURT IN CIT V. VODAFONE ESSAR S OUTH LTD. ([2012] 28 TAXMANN.COM 273) 16. ON THE OTHER HAND THE LD. DR STRONGLY RELIED U PON THE ORDER OF PCIT AND SUBMITTED THAT THE LD. PCIT HAS RIGHTLY EXERCIS ED THE JURISDICTION U/S 263 OF THE ACT SETTING ASIDE THE ASSESSMENT ORDER. THE LD. DR SUBMITTED 18 THAT EVEN THOUGH THE PCIT IN ITS ORDER U/S 263 HAS NOT EXPRESSLY NOTED THE SUBMISSIONS OF THE ASSESSEE MADE IN RESPONSE TO THE SHOW CAUSE NOTICE U/S 263 YET IT CANNOT BE SAID THAT THE SUBMISSIONS OF THE ASSESSEE WERE NOT CONSIDERED BY THE PCIT. THE LD. DR CONTENDED TH AT THE ORDER U/S 263 HAS BEEN PASSED AFTER DULY CONSIDERING THE SUBMISSI ONS MADE BY THE PCIT IN THIS BEHALF. 17. THE LD. DR HEAVILY PLACED RELIANCE ON THE EXPLA NATION 2 TO SECTION 263. SHE ARGUED THAT THE LD. PCIT HAS PASSED THE OR DER U/S 263 BY INVOKING EXPLANATION 2 TO SECTION 263 EVEN THOUGH THE SAME IS NOT EXPRESSLY WRITTEN IN THE ORDER. THE DR ALSO STATED THAT ISSUE OF DISALLOWANCE U/S 14A OF THE ACT HAS ALSO NOT BEEN E XAMINED BY THE AO AND NO DISALLOWANCE WAS MADE BY HIM. DURING REBUTT AL THE COUNSEL FOR THE APPELLANT ARGUED THAT ADMITTEDLY THE LD. PCIT WHILE PASSING THE IMPUGNED ORDER U/S 263 HAS NOT INVOKED EXPLANATION 2 TO SECTION 263 AND THEREFORE THE LD. DR CANNOT TAKE SUPPORT OF THE SA ME TO JUSTIFY THE EXERCISE OF JURISDICTION BY THE PCIT U/S 263. IT IS SUBMITTED THAT IN AN APPEAL AGAINST THE ORDER U/S 263 THE ITAT CANNOT U PHOLD THE IMPUGNED ORDER U/S 263 OF THE ACT ON THE GROUNDS OTHER THAN THOSE TAKEN BY THE COMMISSIONER IN HIS ORDER AND THEREFORE THE ARGUME NT OF THE LD. DR THAT EXPLANATION 2 HAS BEEN INVOKED BY THE LD PCIT IS NO T TENABLE AS THE SAME 19 IS NOWHERE NOTED TO HAVE BEEN INVOKED BY THE LD. PC IT IN ITS ORDER. RELIANCE IS PLACED ON THE DECISION OF THE JURISDICT IONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. JAGADHARI ELECTRIC SUPPLY & INDUSTRIAL CO. [[1983] 140 ITR 490] WHEREIN THE HIGH COURT WHILE D EALING WITH A SIMILAR SITUATION. HE ALSO SUBMITTED THAT A SPECIFIC QUERY WAS RAISED BY THE AO IN RESPECT OF DISALLOWANCE U/S 14A AND A REPLY DATED 2 9.06.2016 WAS FILED STATING THAT THE PROVISION IS NOT APPLICABLE AS THE RE IS NO EXEMPT INCOME AND THE VIEW TAKEN BY AO IS A POSSIBLE VIEW. FURTHE R RELIANCE IS ALSO PLACED ON THE HONBLE MUMBAI ITAT DECISION IN THE C ASE OF NARAYAN RANE TATTU (SUPRA). 18. WE HAVE CONSIDERED THE ARGUMENTS FROM BOTH SIDE S AND PERUSED THE DOCUMENTS AVAILABLE ON RECORD. WE ARE OF THE VIEW T HAT THE AO HAD ISSUED A DETAILED QUESTIONNAIRE RAISING VARIOUS QUE RIES. THE APPELLANT HAD APPEARED FROM TIME TO TIME AND FILED THE DETAILED R EPLIES TO ALL THE QUERIES RAISED. BOOKS OF ACCOUNT WERE PRODUCED ALON G WITH THE SUPPORTING VOUCHERS WHICH WERE EXAMINED BY THE AO. THE CONFIRM ED COPIES OF ACCOUNT WITH PAN NUMBERS OF THE PARTIES TO WHOM SAL ES AND PURCHASES WERE MADE WERE FILED BEFORE THE AO. THE EXPLANATIO N REGARDING FALL IN GP RATE WAS DULY GIVEN. A SPECIFIC QUERY WAS RAISED IN RESPECT OF DISALLOWANCE DURING THE COURSE OF ASSESSMENT PROCEE DING TO WHICH REPLY 20 WAS FILED BY THE ASSESSEE THAT THERE IS NO EXEMPT I NCOME AND PROVISIONS OF SECTION 14A OF THE ACT WILL NOT BE APPLICABLE. T HE DETAILS OF TRAVELING EXPENSE AND GODOWN RENT EXPENSE WERE DULY FILED BEF ORE THE AO. HENCE IT CANNOT BE SAID THAT THIS IS A CASE OF NO ENQUIRY MADE BY THE AO. MERELY BECAUSE THE LD. PCIT FEELS THAT FURTHER ENQUIRY SH OULD HAVE BEEN MADE DOES NOT MAKE THE ORDER OF THE AO ERRONEOUS. 19. THE ASSESSEE HAD FILED VARIOUS REPLIES TO THE L D. PCIT IN RESPONSE TO NOTICE U/S OF THE ACT 263 OF THE ACT STATING THAT A LL THE ISSUES RAISED BY THE PCIT HAVE BEEN EXAMINED BY THE AO DURING THE CO URSE OF ASSESSMENT. THE PCIT HAS IGNORED THE REPLIES OF THE ASSESSEE. H E MERELY STATES THAT THE REPLY HAS BEEN FILED BY THE ASSESSEE BUT HE NOW HERE DISCUSSES THE CONTENTIONS RAISED BY THE ASSESSEE AND WHY HE DOES NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE. THE LD. PCIT HAS MEREL Y REMITTED THE MATTER BACK TO THE AO WITHOUT MAKING ANY ENQUIRY HIMSELF. THE LD. PCIT HAS MENTIONED THAT THE OPENING STOCK HAS NOT BEEN VERIF IED BY THE AO WHEREAS THE TOTAL OPENING STOCK WAS PLEDGED WITH TH E BANK. THE LD. PCIT HAS NOT CONSIDERED THE CONTENTIONS OF THE ASSESSEE. SIMILARLY THE OTHER REPLIES OF THE ASSESSEE FILED DURING THE COURSE OF ASSESSMENT AND IN RESPONSE TO NOTICE U/S 263 OF THE ACT HAVE BEEN TOT ALLY IGNORED. NO ENQUIRY HAS BEEN MADE BY THE PCIT. IT WAS INCUMBENT FOR THE PCIT TO 21 MAKE SOME MINIMUM INDEPENDENT ENQUIRY TO REACH TO T HE CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE RELIANCE IS RIGHTLY PLACED ON THE DECI SIONS OF DELHI HIGH COURT IN PCIT V. DELHI AIRPORT METRO EXPRESS PVT. L TD. (SUPRA) AND INCOME TAX OFFICER V. DG HOUSING PROJECTS LIMITED (SUPRA). THE HONBLE DELHI HIGH COURT IN DELHI AIRPORT METRO EXPRESS PVT. LTD. (SUPRA) E HAS MADE THE FOLLOWING OBSERVATION: 10. FOR THE PURPOSES OF EXERCISING JURISDICTION UND ER SECTION 263 OF THE ACT THE CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE HAD TO BE PRECEDED BY SOME MINIMAL INQUIRY. IN FACT IF THE PCIT IS OF THE VIEW THAT THE AO DID NOT UNDERTAKE ANY INQUIRY IT BECOMES INCUMBENT ON THE PCIT TO CONDUCT SUCH INQUIRY. 20. THE LD. PCIT HAS NOT REFERRED TO EXPLANATION 2 OF SECTION 263 WHICH HAS BEEN INSERTED WITH EFFECT FROM 01.06.2015 HOWEV ER WE AGREE WITH THE FINDING OF THE COORDINATE BENCH IN THE CASE OF NARAYAN TATU RANE (SUPRA) WHEREIN IT HAS BEEN HELD THAT EXPLANATION CANNOT SAID TO HAVE OVERRIDDEN THE LAW AS INTERPRETED BY THE VARIOUS HI GH COURTS WHERE THE HIGH COURTS HAVE HELD THAT BEFORE REACHING A CONCLU SION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE THE 22 COMMISSIONER HIMSELF HAS TO UNDERTAKE SOME ENQUIRY TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. IN THE CASE OF NARAYAN RANE A DOUBT IS ALSO EXPRESS ED REGARDING THE APPLICABILITY OF EXPLANATION 2 WHICH WAS INSERTED BY FINANCE ACT 2015 W.E.F. 01.06.2015 THE BENCH ALSO OBSERVED THAT IF THE EXPLANATION IS INTERPRETED TO HAVE OVERRIDDEN THE LAW AS LAID DOWN BY VARIOUS HIGH COURTS THEN THE SAME WOULD EMPOWER THE PR. CIT TO FIND FAULT WITH EACH AND EVERY ASSESSMENT ORDER AND ALSO TO FORCE THE AO TO CONDUCT ENQUIRIES IN THE MANNER PREFERRED BY THE PR. CIT THUS PREJUD ICING THE MIND OF THE AO HOWEVER THE INTENTION OF THE LEGISLATURE BEHIN D THE EXPLANATION COULD NOT HAVE BEEN SO AS THE SAME WOULD LEAD TO UN ENDING LITIGATION AND NO FINALITY IN THE LEGAL PROCEEDINGS. ACCORDINGLY IN VIEW OF OUR DETAILED DISCUSSION WE ALLOW THE GROUNDS OF APPEAL RAISED B Y THE ASSESSEE. 21. SINCE THE APPEAL HAS BEEN DECIDED HEREINABOVE THE STAY APPLICATION FILED BY THE ASSESSEE HAS BECOME INFRUC TUOUS AND ACCORDINGLY DISMISSED AS HAVING BECOME INFRUCTUOUS. 23 22. IN THE RESULT THE STAY APPLICATION FILED BY TH E ASSESSEE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29.11. 2017. SD/- SD/- [SUDHANSHU SRIVASTAVA] [B.P. JAI N] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH NOVEMBER 2017 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ASST. REGISTRAR 5. DR N EW DELHI