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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI BHAGIRATH MAL BIYANI
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by the assessee against the order dated 21.02.2022 passed by the PCIT (Central), Bhopal for the Assessment Year 2017-18.
The grounds of appeal are as under:
“1. That on facts and in the circumstances of case and in law the finding of the learned CIT that the assessment order passed by the AO in haste without making enquiry/verification are wholly wrong and unjustified and therefore the said findings be quashed.
2. That on the facts and in the circumstances of case and in law the order of the learned CIT is bad in law and without jurisdiction hence be cancelled.
3. That on the facts and in the circumstances of case and in law the order passed by the learned AO allowing the claim of bad debt and the directors submission was in accordance with the law and therefore the learned CIT is unjustified in invoking the provision of 263 of the Act . hence the order u/s.263 is bad in law.
Page 2 of 4 4. That on the facts and in the circumstances of case and in law the assessment order passed by the learned AO is neither erroneous nor prejudicial to the interest of revenue and therefore the order of learned CIT u/s. 263 is bad in law and therefore be quashed.”
The assessment order under Section 143(3) of the Income Tax Act, 1961 for Assessment Year 2017-18 was passed on 18.12.2019. The assessee company is engaged in the business of manufacturing country liquor and Indian Made Foreign Liquor under the licence from Government of Madhya Pradesh. The assessee furnished its original return of income under Section 139 on 26.03.2018 declaring total income of Rs.13,36,73,360/-. The PCIT issued notice under Section 263(1) on 18.01.2022 thereby observing that the assessee claimed expenditure of Rs.58,05,000/- for guarantee Commission-Directors and Rs.77,95,63/- for sundry balances written off, debited to Profit & Loss Account under the head “other expenses”. The PCIT observed that the Assessing Officer while passing the Assessment Order has not made basic enquiry related to expenses under the head guarantee Commission-Directors and sundry balance written off. The PCIT vide order dated 21.02.2022 directed the Assessing Officer to reframe the assessment denovo after conducting proper enquiry in the light of directions given thereby.
The Ld. AR submitted that as per questionnaire issued to the assessee company, the question no.26 specifically asked for providing all copies of bills and ledger relating to business and cash, source of payment in each case in respect of other expenses which was claimed by the assessee amounting to Rs.36,64,63,131/- . The Ld. AR also pointed out the reply which was given to the Assessing Officer stating therein that the chart showing head-wise break up of other expenses as per income tax return was shown during the assessment proceedings. Thus, the Ld. AR submitted that proper enquiry was done by the Assessing Officer and PCIT has not taken cognisance of the original assessment order and wrongly exercised powers under Section 263 of the Act. The Ld. AR submitted that the assessment order is not prejudicial to the interest of Revenue.
Ld. DR submitted that the PCIT has specifically observed that the question related to guarantee Commission-Directors and sundry balance written off over the head other expenses were not verified and from the perusal of the questionnaire
Page 3 of 4 issued by the Assessing Officer it appears that the same is general in nature. Thus, the Ld. DR relied upon the order of the PCIT passed under Section 263 of the Act.
We have heard both the parties and perused all the relevant material available on record. It is pertinent t to note that the amount of Rs.36,64,63,131/- claiming other expenses was before the Assessing Officer but the explanation related to guarantee Commission-Directors and sundry balance written off were not called for by the Assessing Officer considering the assessment proceedings. Thus, the Assessing Officer has not taken the actual enquiries of these aspects of other expenses and simply passed the Assessment Order on the basis of the income declared in the return of income by the assessee. The element of sundry balance written off and the guarantee Commission-Directors should have been enquired thoroughly and reply given by the assessee, has not given any details related to these two heads of expenses. Thus, the order under Section 143(3) was erroneous and prejudicial to the interest of Revenue and PCIT has rightly invoked revisionary powers under Section 263 of the Act. The PCIT has not expressed any view as such but has categorically mentioned that the AO has failed to conduct the enquiry related to these expenses. Thus, the order passed by the PCIT under Section 263 of the Act is just and proper and there is no need to interfere with the same.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on this 20th December, 2022.