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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 262/JP/2020
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 262/JP/2020 fu/kZkj.k o"kZ@Assessment Years : 2015-16 cuke Sh. Ayub Ali The Pr.CIT-3, Vs. Bus Stand Road, Jaipur. Ratangarh, Churu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABNPA1065 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri Mukesh Verma (CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 17/12/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 15/02/2021 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. The assessee has filed the present appeal against the order of ld. Pr.CIT(A)-III, Jaipur dated 17.03.2020 pertaining to assessment year 2015-16 wherein the assessee has taken the following grounds of appeal:- “1. Under the facts and circumstances of the case, order passed by the Ld. PCIT u/s 263 is illegal & bad in law and the same be quashed.
2. The Ld. PCIT has erred on facts and in law in directing the AO to pass the order denovo ignoring that the case of assessee was selected for limited scrutiny and the issues raised in section 263 2 Sh. Ayub Ali vs. Pr.CIT notice was not only verified by the AO but also explained before the PCIT on which no adverse finding was given.”
2. During the course of hearing, the ld AR submitted that the assessee is engaged in the business of providing diagnostic services in the name of M/s Emkay Medicare Services. Return was filed on 30.09.2015 at total income of Rs. 84,91,160/-. The case of assessee was selected for limited scrutiny for 2 reasons, i.e. (i) large other expenses claimed in the P&L A/c (ii) mismatch of sales turnover reported in the audit report and ITR. In course of assessment proceedings AO verified the various expenses debited to P&L A/c particularly the expenditure claimed under the head discount on CT and MRI test to BPL& others (PBM). Assessee explained the same as per the letter placed at PB 42-43. The AO after considering the same and examining the other expenses made addition of Rs. 20,74,797/- U/s 40A(3) and Rs.1 lacs out of the various expenses debited to P&L A/c and thus completed the assessment at income of Rs.1,06,65,957/-.
3. Against the assessment order assessee filed appeal before the Ld. CIT(A) who vide order dated 31.01.2019 in Appeal No.354/18-19 deleted both the additions/ disallowances made by the AO. The Ld. CIT on the basis of audit objection issued notice U/s 263 of the Act as reproduced in his order wherein he observed that AO has (i) not verified the receipt as reflected in Form 26AS (ii) not verified the discount claimed on account of free services given to BPL and other as per the contract entered with the Government of Rajasthan by calling the required document and (iii) not scrutinize the final accounts submitted 3 Sh. Ayub Ali vs. Pr.CIT before the AO. Therefore, the order passed by AO is erroneous and prejudicial to the interest of Revenue.
4. The assessee in response to show cause notice vide its letter dated 16.03.2020 submitted that in course of assessment proceedings, assessee produced complete books of accounts for verification which was examined by the AO after which certain disallowance was made. This is accepted by the AO at Para 3 of the assessment order where he has mentioned that on examination of books of accounts and other documents as produced by the assessee during the assessment proceedings, it is seen that assessee has made payment for …….’. Further in Para 4.2 it is mentioned that ‘on verification it was noticed that certain expenses like ……..’. Thus, the AO has examined and verified books of accounts, bills & vouchers and thereafter completed the assessment. He has also examined the contract entered by the assessee with Rajasthan Medicare Relief Society, PBM Hospital, Bikaner in verification of the discount claimed in P&L A/c. Apart from this explanation regarding receipt of Rs.1,49,65,860/- received from Rajasthan Medicare Relief Society with reference to its inclusion in the receipt declared by the assessee and explanation with regard to the discount on account of free services provided to BPL and other patients as per clause 7 of the agreement was explained. It is also submitted that once the assessment order is subject matter of appeal the same is not amenable to proceedings u/s 263. Thus, it is contended that AO passed the order after complete verification/enquiry and order passed by him is not erroneous or prejudicial to the interest of revenue. 4 Sh. Ayub Ali vs. Pr.CIT
The Ld. CIT, however, at Pg 9-11 of the order held that proceedings U/s 263 even when the assessment order is subject matter of appeal is valid in view of clause (c) of Explanation 1 to section 263. The AO has not examined the receipt of Rs.1,49,65,860/- and has also not examined that expenditure of Rs.1,19,35,260/- for discount on CT/MRI test for BPL & others when all the relevant expenditure is already claimed in the P&L A/c. Accordingly, by referring clause (a) & (b) of Explanation 2 to section 263 he set aside the order of AO to pass the same denovo after making necessary examination and verification.
6. In the aforesaid background, it was submitted by the ld. AR that the case of the assessee was picked up for limited scrutiny to verify the large other expenses claimed in the P&L A/c and mismatch of sales turnover reported in audit report and ITR. Both these issues were examined by the AO with reference to books of accounts and bills and vouchers produced before him. It may be noted that the case of assessee was selected for limited scrutiny and as per CBDT Instruction No.20/2015 dated 29.12.2015 it is specifically mentioned that in case of limited scrutiny, questionnaire U/s 142(1) of the Act shall remain confined to specific reasons/ issues for which case has been picked up for scrutiny. Only when the AO notices that there is potential escapement of income exceeding Rs.5 lacs then the case may be taken for complete scrutiny. However, on verification of the issues taken up for limited scrutiny, AO has not found anything incorrect and therefore, there was no reason for him to ask for complete scrutiny though on verification of the expenditure claimed in the P&L A/c he has made disallowance. Thus, the order of AO so far as his ambit under the 5 Sh. Ayub Ali vs. Pr.CIT limited scrutiny is concerned cannot be held to be erroneous or prejudicial to the interest of revenue.
It was submitted that the ld. PCIT has observed that AO has not examined the expenditure of Rs.1,19,35,260/- claimed on account of discount on CT/MRI test whereas all relevant expenditure pertaining to such test has been claimed in the P&L A/c. Further the AO has not verified to whom free services has been rendered relating to MRI & CT Scan test claimed as per the contract entered with Rajasthan Medicare Services by calling the required documents. These observations are not correct. In course of assessment proceedings assessee at Point No.1 of his reply explained that he is providing the CT/MRI test services as per the agreement entered with PBM Hospital, a copy of which was filed. It was also explained that as per the agreement certain category of patients are to be provided free services for which discount is claimed in the P&L A/c. Thus, this issue is also examined by the AO. In the proceedings U/s 263 of the Act the assessee further explained that as per clause 7 of the agreement, 20% of total MRI/CT scan test are to be provided free of cost to the patients of BPL and other free category patients. For these free services assessee is first recording the income and then the income recorded on account of free services is debited to P&L A/c as discount. In support of the same the working of discount along with the ledger account of CT scan/ MRI services receipt, ledger account of PBM Hospital, Bikaner and ledger account of discount and CT/ MRI test was provided. The Ld. CIT has not found anything adverse in the same and therefore, on this issue the order passed by AO cannot be held to be erroneous or prejudicial to the interest of revenue. 6 Sh. Ayub Ali vs. Pr.CIT
8. It was further submitted that ld. PCIT has also observed that AO has not examined the receipt of Rs. 1,49,65,860/- reflected in Form 26AS. In assessment proceedings, since the gross receipt declared by the assessee was Rs. 6,14,24,700/- as against receipt of Rs.1,49,65,860/- reflected in Form 26AS, there was nothing for the AO to entertain any doubt on the receipt declared by assessee. Further in sec. 263 proceedings it has been clarified that Form No.26AS only reflects receipt of Rs.1,49,65,890/- from Rajasthan Medicare Relief Society which is a part of the gross receipt declared. The reconciliation of such receipt with reference to ledger account of PBM Hospital and CT/ MRI scan receipt was filed. Nothing adverse was found by the PCIT in the same. Hence, on this account the order passed by AO cannot be held to be erroneous or prejudicial to the interest of revenue. The Ld. PCIT has directed the AO to pass the assessment order afresh ignoring that when the case is selected for limited scrutiny the jurisdiction of CIT for holding the order erroneous or prejudicial to the interest of revenue is confined only to the issue of limited scrutiny and not to direct the AO to pass a denovo assessment afresh by raising issues beyond what is permitted in the limited scrutiny. Hence, the direction given by Ld. CIT is also bad in law.
It was submitted that the case of assessee was selected for limited scrutiny for the reason of large other expenses claimed in the P&L A/c. The AO has examined the expenses claimed in P&L A/c and made certain disallowances. These disallowances were subject matter of appeal. Thus, the Ld. CIT(A) has power U/s 251 of the Act to 7 Sh. Ayub Ali vs. Pr.CIT enhance the assessment not only on the issues for which disallowance was made by AO but to all expenses debited in P&L A/c. Hon’ble Gujarat High Court in case of CIT Vs. Ahmedabad Crucible Co. 206 ITR 574 has held that powers of the AAC are not confined to the subject matter of appeal but extend to the subject matter of assessment. Hon’ble Supreme Court in case of CIT Vs. Nirbheram Deluram 91 Taxmann 181 has held that appellate powers conferred on AAC is not confined to the matter which has been considered by the ITO and thus, additions made by the AAC on account of unexplained hundi loans which had not been considered by ITO would be justified. Thus, the power of CIT(A) for enhancement extend to all the issues considered by the AO though he has no power to enhance the assessment by discovering new sources of income. In the present case, the Ld. CIT(A) has decided the appeal of assessee on the disallowance of expenses claimed in the P&L A/c and therefore, with reference to the expenses the order of AO has merged with that of the CIT(A) and therefore, the CIT cannot invoke the revisionary jurisdiction u/s 263 by taking shelter to Explanation (c) to section 263(1).
It was also submitted that in the present case notice u/s 263 has been issued on account of the audit observations raised by the audit team. This fact has not been disputed. Suggestion by audit party cannot form the basis of revision as held by Hon’ble Calcutta High case of Jeewan Lal Ltd. Vs. Addl. CIT 108 ITR 407. Hence, on this ground itself the order passed u/s 263 is illegal and bad in law. 8 Sh. Ayub Ali vs. Pr.CIT 11. It was accordingly submitted that the Ld. PCIT has referred to clause (a) & (b) to Explanation 2 to section 263(1) to justify the order passed by him. These clauses are applicable where order is passed without enquiries or verification which should have been made. In the present case, the enquiries and verification required with reference to expenses claimed in the P&L A/c has been made by the AO. Therefore, these clauses are not attracted to the facts of assessee’s case. Reliance was placed on the following decisions:-
• Torrent Pharmaceuticals Ltd. Vs. DCIT (2018) 173 ITD 130 (Ahd.) • Amira Pure Foods Pvt. Ltd. Vs. PCIT (2017) 63 ITR(Trib.) 355 • Baby Memorial Hospital Ltd. Vs. ACIT 111 taxmann.com 189.
Per contra, the ld. CIT/DR vehemently argued the matter and taken us through the findings of ld Pr CIT which reads as under:-
“5. I have considered the facts and circumstances of the case and also examined the case records along with written submission filed by the assessee before me.
Here it is also mentioned that U/s 263 of the Income Tax act the Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee and opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment for cancelling the assessment and directing as fresh assessment. Accordingly, the records of the assessee were called for an 9 Sh. Ayub Ali vs. Pr.CIT examined with all material available therein for forming an informed opinion in the case.
At the outset the AR of the assessee has mentioned in brief the show cause notice as issued by this office and submitted that the AO examined all the issues while completing the assessment order. However, this submission of the AR of the assessee is not acceptable. The AR of the assessee also submitted that the appeal in this case has been decided on 31.01.2019 allowing part relief to his assessee and these issues cannot be further examined u/s 263 of the Income Tax Act, 1961. However, from the records of this office, it is seen that the assessee went in for appeal before CIT (A) on the issue of disallowance made u/s 40A(3)of the Act and lump sum addition of Rs. 1,00,000/- out of `Other expense' like advertisement expenses, fuel, gen-set expenses, legal expenses, maintenance expenses, misc. office expenses, sale promotion expenses, stationery & printing expenses. Therefore, it is apparent that CIT(A) has not decided any of the issue on which notice u/s 263 of the Act has been issued by the undersigned. On this matter assessee’s attention is drawn to para (c) of Explanation 1 of Section 263(1) of the Act wherein it is categorically mentioned that "where any order referred to in this sub-section and passed by the Assessing Officer had been subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed to have extended] to such matter as had not been considered and decided in such appeal." Since the matter for which proceedings u/s 263 of the Act has been initiated cannot be in question in appeal as the AO has allowed incorrect deduction to the assessee and what has been incorrectly allowed by the AO in assessee’s favour cannot be in question before CIT(A). Therefore, the proceedings u/s 263 of the Act has rightfully been initiated. As regards, assessee’s alleged statement in his AR’s written submission dated 16.03.2020 that the Ao has 10 Sh. Ayub Ali vs. Pr.CIT examined the case and made proper enquiries is also not correct. The AO has not examined the receipts of Rs. 1,49,65,860/- reflecting in 26AS and has also not examined all the expenditure debited in P&L account amounting to Rs. 1,19,35,260/- for discount on CT Test, MRI Test for BPL and others as all relevant expenditure pertaining to maintenance of CT scan and MRI machine, Laser image film, reporting fees on test, electricity and water expenses, depreciation. None of the issue was subject matter of appeal as claimed by the assessee.
While holding so, AO failed to take note of various other facts which were available on record. Some of the relevant facts relating to the issue in hand are summarized as below.
The AO has not verified the receipts as reflecting in Form 26AS for the year under consideration as perusal of records show that what the assessee has produced during the hearing of proceedings u/s 263 of the Act were not at all submitted before the AO and the AO has not called for the relevant details pertaining to this issue.
The AO has not verified the various discounts claimed as to whether Government of Rajasthan i.e. Rajasthan Mecicare Services.
The AO has not verified as to whom free services have been rendered related to MRI and CT scan test in F.Y. 2014-15.
The AO has not called for the required documents and has not scrutinized the final accounts presented before him/her.
7. This omission as made by the Assessing Officer resulting in an order which is erroneous as well as prejudicial to the interest of Revenue. It has necessitated the initiation of proceedings under section 263 of the Income Tax Act. This order has been 11 Sh. Ayub Ali vs. Pr.CIT
done in a very mechanical way. This action of the AO has resulted in an erroneous passing of assessment order u/s 143(3) of Income Tax Act, 1961 which required high level of care while finalzing assessment order. The order dated 29.09.2017 u/s 143(3) passed by the AO is clearly prejudicial to the interest of Revenue and clearly calls for invocation of section 263 of the Income Tax Act, 1961.
Keeping the above discussion in view by the virtue of the powers conferred on the undersigned under the provisions of Section 263 of the IT Act 1961 I hold that the order under 143(3) dated 29/09/2017 for assessment year 2015-16 passed by the assessing officer is erroneous insofar as it is prejudicial to the interest of revenue as the order has been passed by the assessing officer in a routine and perfunctory manner by without application of mind. It is therefore liable to revision under explanation (2) clause (a) & (b) of section 263 of the Income Tax Act. Therefore holding that the order dated 29.09.2017 being erroneous and prejudicial to the interest of revenue is set aside on the issue with a direction to the assessing officer to pass the same in the case of the assessee de novo in accordance with law after making the necessary examination and verification regarding the issues under discussion .The AO is directed to finalize the assessment order keeping in view the facts of the case and correct application of law. However an opportunity to the assessee to state its case is to be allowed in the interest of natural justice.”
We have heard the rival contentions and perused the material available on record. Firstly, we refer to the contention advanced by the ld. AR that this is a case of limited scrutiny and therefore, the directions given by the ld. Pr.CIT to pass a denovo assessment afresh by raising issues beyond what is permitted in the limited scrutiny in bad in law. In this regard, we find that the case of the assessee was selected for 12 Sh. Ayub Ali vs. Pr.CIT limited scrutiny for the reasons of large “other expenses” claimed in the Profit & Loss account and mismatch of sales turnover reported in the audit report and ITR. In the show cause notice issued U/s 263 of the Act, the ld. Pr. CIT has stated that Form 26AS reveals that the licensor has paid an amount of Rs. 1,49,65,860/- which is not included in the total turnover of the assessee. Further, it has been stated that the assessee has claimed expenditure of Rs. 1,19,35,260/- in its profit and loss account towards discount on CT test and MRI test which is not allowable as all the relevant expenditure pertaining to this tests have been claimed separately by the assessee in its profit and loss account. Thereafter, we refer to the findings of the ld. Pr.CIT which are contained at para 6 of his order which are again talking about non verification of receipts as reflecting in Form 26AS and non verification of discount claimed by the assessee as well as the connected issue relating to free services related to MRI and CT Scan test. Thereafter at para 8 of his order, the ld. Pr. CIT has held that “the order dated 29.09.2017 is set aside on the issue with the direction to the Assessing Officer to pass the same denovo in the case of the assessee in accordance with law after making the necessary examination and verification regarding the issues under discussion.” We therefore, find that the directions by the ld. Pr. CIT to carry out the fresh assessment is limited to the issue mentioned at Para 6 of his order relating to non-verification of receipts, discount claimed by the assessee and related free services provided by the assessee. These issues are clearly subject matter of limited scrutiny and therefore, the contention so advanced by the ld. AR cannot be accepted. 13 Sh. Ayub Ali vs. Pr.CIT
The second contention which has been raised by the ld. AR is that the AO has examined the expenses claimed in the profit and loss account and made certain disallowances and these disallowances were subject matter of appeal and since the Ld. CIT(A) has decided the appeal of assessee on the disallowances of expenses claimed in the P&L A/c, therefore, with reference to the expenses, the order of AO has since merged with that of the CIT(A) and therefore, the ld Pr.CIT cannot invoke the revisionary jurisdiction U/s 263 of the Act. We have given careful consideration to the said contention advanced by the ld AR but we are not convinced with the same and the same cannot be accepted. The reason for the same is that what has been disallowed by the Assessing Officer is 10% of expenses in the nature of advertisement expenses, Fuel Genset expenses, Legal expenses, maintenance expenses, misc. office expenses, sales promotion expenses, stationery and printing expenses and the expenses pertaining to discount which is subject matter of show cause by the ld. Pr. CIT was not at all examined and considered and for that matter, the subject matter of the assessment order, therefore, it cannot be said that by virtue of filing an appeal against disallowances so made by the Assessing Officer and the ld. CIT(A) has decided the appeal, the order of the AO has merged with that of the ld. CIT(A). In our considered view, the matter pertaining to discount claimed by the assessee in its profit/loss account was not subject matter of assessment order as well as that of the appellate order passed by the ld CIT(A) and therefore, where the matter was not considered and decided by the ld CIT(A), the theory of merger as canvassed by the ld A/R cannot be accepted and the ld Pr CIT is well 14 Sh. Ayub Ali vs. Pr.CIT within his jurisdiction to exercise his powers on such matters under section 263 of the Act.
Now coming to the issue of mismatch of receipts as reflected in Form 26AS and what has been reported by the assessee and in this regard, it has been claimed that since the assessee has declared receipts of Rs. 6,14,24,700/- as against receipt of Rs. 1,49,65,890/- reflected in Form 26AS, there was nothing for the AO to entertain any doubt and enquire about the receipts so declared by the assessee. To our mind, when one of the reasons for which the limited scrutiny was initiated was mismatch of the receipts, in such circumstances, it was reasonably expected and incumbent on the part of the Assessing Officer to carry out detail verification and seek details from the assessee regarding such mismatch and only where the Assessing Officer was satisfied with the reconciliation of receipt figures, he should have accepted what has been declared by the assessee in terms of his receipts. Further, merely because the reported receipts are more than what has been reflected in Form 26AS, it cannot be presumed that what has been reflected in Form 26AS has been included in the receipts as the question is not about the sum total of receipts rather the question is about the particular receipts pertaining to the financial year which are reflected in the Form 26AS are reported to tax or not. We find that it is only during the course of revisionary proceedings that such reconciliation has been submitted by the assessee for the first time and given the fact that the Assessing Officer has not examined the same, the ld. Pr. CIT has remitted the matter to the Assessing Officer for necessary verification. It is therefore, a case of complete lack of enquiry 15 Sh. Ayub Ali vs. Pr.CIT on the part of the Assessing Officer of the issue in respect of which the case has been selected for limited scrutiny and given such failure on the part of the Assessing Officer to carry out the necessary verification and examination, the orders so passed by him is clearly erroneous and prejudicial to the interest of the Revenue and finding of the ld. Pr CIT are hereby sustained.
Now coming to the other matter relating to expenditure of Rs. 1,19,35,260/- claimed on account of discount offered by the assessee in relation to CT scan and MRI test and the related free services provided by the assessee to the patients. We find that except for brief reply contained at assessee’s paper book page 42 where there is a mention of provision of free service and the discount claimed in the profit and loss account, the Assessing Officer has not enquired about the matter and carry out any further verification and examination inspite of the fact that the same was subject matter of limited scrutiny as large other expenses claimed in the profit/loss account and in such circumstances, it was reasonably expected and incumbent on the part of the Assessing Officer to carry out detail verification and seek details from the assessee regarding claim of discount of Rs 1,19,35,260/- constituting over 19% of gross receipts of Rs 6,14,24,700/- and only where the Assessing Officer was satisfied with the explanation and documentation so submitted by the assessee, he should have accepted the said claim of discount. There are no details available on the assessment records as to how such discounts have been claimed in the profit and loss account, in which heads and what kind of free services are provided by the assessee to various 16 Sh. Ayub Ali vs. Pr.CIT patients in respect of which such discounts have been claimed and the linkage thereof with revenues so offered in the profit/loss account. We find that it is a case where the assessee has made a brief submission before the Assessing officer and the same been taken on face value by the Assessing Officer without any further examination and verification. We find that it is only during the course of revisionary proceedings that certain explanation has been given regarding percentage of tests which have to be provided free of cost by the assessee and how the same has been accounted for in the profit/loss account. We find that even such explanation need to be corroborated with entries in the books of accounts and given the fact that the Assessing Officer has not examined the same, the ld. Pr. CIT has remitted the matter to the Assessing Officer for necessary verification. It is again a case of no enquiry to our mind and not just lack of enquiry, therefore, there is no infirmity in the findings of the ld. Pr. CIT that the AO has not verified the various discounts claimed as to whether discounts of the claimed as per contract with Rajasthan Medicare Relief Society and to whom free service has been rendered relating to MRI and CT scan and how the same has been accounted for in the profit and loss account. In this regard, useful reference can be drawn to observations of the Coordinate Bench in case of Subhlakshmi Vanijya (P.) Ltd. vs Commissioner of Income-tax-I, Kolkata, reported in 60 taxmann.com 60 (Kolkata - Trib.) wherein it was held under: “It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different circumstances. There cannot be straight jacket formula to positively conclude as 17 Sh. Ayub Ali vs. Pr.CIT
to conducting or non-conducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just ordinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, the obtaining of the documents and the application of mind thereon, without a further outside enquiry, may mean that the Assessing Officer did conduct enquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it, then a mere collection of documents cannot be held as conducting enquiry, leave aside, adequate or inadequate. In such later cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a particular transaction cry hoarse about its non- genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of papers on record in such circumstances cannot be construed as conducting a proper enquiry. If in such circumstances, the Assessing Officer simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of 'no enquiry' because of the inaction on the part of the Assessing Officer to read a writing on the wall.”
In the instant case, where there are discounts claimed to the extent of 19% and above of gross receipts so reported and there are no 18 Sh. Ayub Ali vs. Pr.CIT details available on record except the quantum of discount and an explanation that the discount has been given to the patients as per agreement with PBM Hospital and more so, when the matter was selected for the precise reason of examination of such huge commission payments, it is ordinarily expected that the Assessing officer examine these transactions thoroughly rather than just relying on the information submitted by the assessee company. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld Pr CIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates claim of huge discount which is a matter of limited scrutiny and thus cry for looking deep into it, then a mere acceptance of an explanation without conducting any further verification and examination cannot be held as conducting an enquiry. In our considered view, it is a clear case of no enquiry on part of the Assessing officer and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue. In light of same, where the AO shuts his eyes and the ld PCIT discovers the glaring discrepancies regarding claim of discount expenses during the course of his examination of records, we donot think there is any infirmity or illegality in ld Pr CIT exercising his revisionary jurisdiction u/s 263 of the Act.
Before parting, we may add that we have also gone through other legal authorities on the subject as brought to our notice by the ld 19 Sh. Ayub Ali vs. Pr.CIT AR which have been rendered in the context of specific facts and circumstances of the individual cases, however, the same doesn’t support the case of the assessee company.
We accordingly upheld the order passed by the ld Pr CIT u/s 263 of the Act setting aside the assessment order passed by the Assessing officer for the limited purposes of examining the issues of mismatch of receipts and discounts claimed in the profit/loss account and to decide the same as per law after making necessary examination and verification.
In the result, the appeal filed by the assessee is dismissed.