NIDAAN EXIM P LTD,NEW DELHI vs. PCIT, DELHI-4, DELHI

In the order passed u/s 263 by Ld.CIT(Admin.), the assessment order was held as erroneous and pre-judicial to the interest of the Revenue on following three (03) counts:- [i] verification of genuineness of business purchase remained unverified with respect to Nine parties to whom notices were issued u/s 133(6) of the Act; [ii] verification of unsecured loans was not done; and [iii] verification of trade receivables outstanding was not done.

Before us, Ld. AR for the assessee submits that case of the assessee was selected for scrutiny for verification of business purchases. He thus, submits that issue other than business purchases, being not forming part of the reason for scrutiny under CASS and, therefore, the assumption of jurisdiction by Ld. CIT(Adm.) on the issues other than verification of business purchases is incorrect and requested for the exclusion of these issues from consideration for the purposes of invoking the provisions of section 263 of the Act. Regarding the verification of purchases, Ld. AR submits that details of the purchases were filed before the AO as well as Ld. CIT(Adm.) by the assessee however, only for the reason that out of total twenty Six (26) parties, only Nine parties have not replied to the notices issued u/s 133(6) of the Act. Thus, based on this fact, Ld. CIT(Adm.) was of the opinion that the order of AO is erroneous and pre-judicial to the interest of the Revenue. He submits that when all the details were filed by the assessee and thereafter, AO has taken a plausible view and accepted the returned income therefore, the order of Ld. PCIT holding that the assessment order as and pre- judicial to the interest of the Revenue is incorrect and be quashed.

On the other hand, Ld.CIT DR vehemently supported the orders of the lower authorities and requested for the confirmation of the same.

Heard the contentions of both the parties and perused the material available on record. It is observed that the case of the assessee was taken up for scrutiny under CASS for verification of business purchases. However, Ld. CIT(Adm.) held the assessment order as erroneous and pre-judicial to the interest of the Revenue for non-verification of the unsecured loans and sundry creditors which are not the subject matter of the reason for which the case of the assessee was selected for scrutiny under CASS, therefore, the AO was not under any obligation to examine these issues. Once the examination of these issues was outside the purview of assessment, Ld. CIT(Adm.) cannot hold that the AO has made an error by not verifying these issues and thus the assessment order cannot be held as erroneous and pre-judicial to the interest of the Revenue. We, therefore, of the considered opinion that so far as these two issues are concern viz: (i) verification of unsecured loans; and (ii) verification of outstanding trade receivables, the assessment order cannot be held as erroneous and pre-judicial to the interest of the Revenue.

Regarding the remaining issue of verification of business purchases, it is observed that out of 26 parties to whom notices u/s 133(6) were issued, only 09 parties had not replied however, the AO accepted the genuineness of the purchases made from these parties and returned income was accepted. It is an admitted fact that Nine parties had not filed any response though the assessee has filed the relevant details of the purchases made from them. Under these circumstances, in our opinion, the assessment order is erroneous and pre-judicial to the interest of the Revenue to this extent and, therefore, on the limited issue of verification of the purchases from the Nine parties who had not filed any response, we confirmed the order of Ld. CIT(Adm.). Accordingly, the same is hereby, upheld on this extent. With these observations, all Grounds of appeal raised by the assessee are partly allowed.

In the result, appeal filed by the Assessee is partly allowed.