HDFC ASSET MANAGEMENT COMPANY LIMITED,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX - 1, MUMBAI

We heard the parties and perused the record. The assessee is engaged in the investment management and Portfolio management services. We shall first take up the appeal filed for AY 2012-13. The assessment for AY 2012-13 was completed by the AO u/s 143(3) of the Act on 18-03-2016. The Ld Pr. CIT passed the revision order u/s 263 of the Act on 21.3.2018, on noticing that the assessment order is erroneous and prejudicial to the interests of revenue, since the AO did not examine the expenses claimed by the assessee under the head “Business Promotion Expenses” and “foreign travel expenses”. The Ld Pr. CIT noticed that the assessee has simply furnished the break up details of Business promotion expenses and Travelling expenses before the AO during the course of assessment proceedings and the AO has also accepted the same

Before Ld Pr. CIT, the assessee furnished detailed explanations with regard to both the expenses cited above. However, Ld Pr. CIT took the view that the assessment order is rendered erroneous and prejudicial to the interests of revenue, as the AO did not conduct any enquiry on both the expenses. Accordingly he took the view AO should examine both the expenses again. Accordingly, he set aside the assessment order u/s 263 of the Act and directed the AO to do the assessment de novo, after affording sufficient opportunity to the assessee.

Before us, the Ld A.R submitted that the assessee has been incurring expenses of identical nature year after year and they have been accepted in the past and also in AY 2014-15. He submitted that the AO has conducted detailed enquiries in assessment year 2014-15 in respect of Business Promotion expenses & Travelling expenses and finally accepted the claims of the assessee. He submitted that the assessee has furnished break-up details of the expenses in this year, as called for the AO. Since the AO did not find any deficiency in the claim, he has allowed the claim without making further enquiries. The Ld A.R submitted that the assessee has furnished detailed explanations before Ld Pr. CIT in the revision proceedings. The Ld Pr. CIT did not find any fault in the explanations so furnished. He submitted that the Ld Pr. CIT, without making a prima facie case of deficiency in the explanations furnished by the assessee, should not have come to the conclusion that the assessment order passed by the AO is erroneous and prejudicial to the interests of the revenue. Accordingly he submitted that the revision order passed by Ld Pr. CIT should be set aside. The Ld A.R also took support of the decision rendered by Hon’ble Bombay High Court in the case of CIT vs. Nirav Modi (2017)(77 taxmann.com 272).

We have heard rival contentions and perused the record. It is an admitted fact that the assessee has simply furnished break up details of Business promotion expenses and Travelling expenses before the AO during the course of assessment proceedings. The AO has accepted the claim of the assessee without making any enquiry. The Ld A.R took us through the paper book to show that the assessing officer did make enquiries during the course of assessment proceedings relating to AY 2014-15 and was satisfied with the claim made by the assessee in that year. As pointed out by Ld D.R, the acceptance of the identical claim in AY 2014-15 may not help the assessee in this year, as the question of allowability of expenditure claimed during the year under consideration would depend upon the facts pertaining to the claim.

The Hon’ble Supreme Court has held in the case of Malabar Industrial Company (supra) that the assessment order will not be rendered erroneous, if the AO has taken a possible view. In the instant case, since the assessing officer has not made any enquiry with regard to the claims cited above, the question of forming opinion thereon shall not arise. Hence it cannot be said that the assessing officer has taken a possible view. The decision rendered in the case of Nirav Modi (supra) is concerned with adequacy of enquiry made by the AO, whereas, the present case is concerned with non-enquiry. At this 4 HDFC Asset Management Company Limited stage, we prefer to extract the following observations made by Hon’ble Bombay High Court in the case of Nirav Modi (supra) 6. It is a settled position in law that powers under Section 263 of the Act can be exercised by the CIT on satisfaction of twin conditions viz. the Assessment Order should be erroneous and prejudicial to the Revenue. By erroneous is meant contrary to law. Thus, this power cannot be exercised unless the CIT is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the Revenue. Thus where there are two possible views and the Assessing Officer has taken one of the possible views, no occasion to exercise powers of Revision, can arise. Nor can Revisional power be exercised for directing a fuller inquiry to find out if the view taken is erroneous, when a view has already been taken after inquiry. This power of Revision can be exercised only where no inquiry as required under the law is done. It is not open to enquire in cases of inadequate inquiry.

The Ld A.R also contended that the Ld Pr. CIT did not point out any deficiency in the explanations furnished by the assessee before him. The Ld Pr. CIT has taken the view that the explanations furnished by the assessee need to be examined by the AO, as the non-enquiry on the part of the AO itself would make the assessment order erroneous and prejudicial to the interests of revenue.

In view of the foregoing discussions, we are of the view that the Ld Pr. CIT was justified in passing the impugned revision order for AY 2012-13. Accordingly we uphold the order passed by him.

We shall now take up the appeal filed by the assessee for AY 2013-14. The facts in this year are identical with the facts of AY 2012-13. In the earlier paragraphs, we have upheld the revision order passed for AY 2012-13 for the reasons discussed in the preceding paragraphs. Following the same, we uphold the order passed by Ld Pr. CIT in AY 2013-14 also.

In the result, both the appeals of the assessee are dismissed. Order has been pronounced in the Court on 30.10.2018.