A3LOGICS (INDIA) PRIVATE LIMITED,JAIPUR vs. PCIT, JAIPUR -1, JAIPUR

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 jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 190/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2018-19 cuke A3logics (India) Private Limited PCIT, Vs. H 1-458-460, Sitapura Jaipur Jaipur-1 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAHCA 9763 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Mahendra Gargieya (Adv.) jktLo dh vksj ls@ Revenue by : Sh. Ajay Malik (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 09/08/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 27/09/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal is filed by assessee and is arising out of the order of the Principal Commissioner of Income Tax, PCIT, Jaipur-1 dated 21.03.2023 [here in after (ld. PCIT)] for assessment year 2018-19 which in turn arise from the order dated 01.02.2021 passed under section 143(3) r.w.s 143(3A) & 143(3B) of the Income Tax Act, by the National e-Assessment Centre, Delhi.

“1. The ld. PCIT, Jaipur-1 erred in law as well as on the facts of the case in taking the action u/s 263 which is bad in law without jurisdiction and being void ab-initio, the same may kindly be quashed.

3. The assumption of jurisdiction u/s 263 and the impugned direction, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 21.03.2023 deserves to be quashed.

5. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.”

3. The fact as culled out from the records is that the assessee has e- filed his return of income for Assessment Year 2018-19 on 14.09.2018 vide Ack.No.292265891140918 showing taxable income of Rs.1,85,52,940/-.

The case was selected for scrutiny under CASS on the reason that “High ratio of refund to TDS and Lower amount disallowed u/s 40(a)(i) ITR (Part A-01) in comparison to default found u/s 201 as per data received from CIT (CPC-TDS). Accordingly, notices u/s 143(2) & 142(1) were issued and served upon the assessee within stipulated time. In response to the notices e-proceedings module on ITBA. The assessee is a company engaged in providing services in relation to software, maintenance of servers, IT consulting, offshoring and next generation professional services. During the year the company undertook a construction of building contract too. Based on the details called for by the ld. AO the assessment was completed at returned income.

4. On culmination of the assessment proceeding ld. PCIT called for the records. On examination of the assessment records the ld. PCIT noted that the assessee claimed the expenses towards professional / consultancy / technical / legal services. The total payment that has been amounts to Rs. 3,20,19,905/- in lieu of professional / consultancy / technical / legal services. The ld. PCIT noted that the assessee has deducted TDS on amount of Rs. 1,76,23,934/- Thus, on account of this 30 % remaining amount of Rs, 1,43,91,971/- i.e. 43,17,591/- was liable to disallowed a sper provision of section 40a(ia)(ii) of the Act. Further the assessee debited rent expenses of Rs. 55,45,213/- whereas TDS has been deducted for an amount of Rs. 45,00,000/- thus 30 % of 10,45,213/- amounting to Rs. 3,13,564/- was liable to disallowed. Further to that the assessee had made late deposit of ESI/PF to exchequer totaling to Rs. 20,87,257/- liable to be Further the PCIT also noted that an amount of Rs. 1,04,776/- u/s. 40(a)(i) of the Act adjusted and added in the intimation issued u/s. 143(1) of the dated 04.01.2019 has not been considered while passing the order by the ld. AO. Based on these observations the ld. PCIT noted that the assessment order passed by the ld. AO is erroneous and prejudicial to the interest of the revenue. Therefore, proceeding u/s. 263 of the Act initiated vide notice dated 10.02.2023. In response the assessee filed the reply dated 16.02.2023. The PCIT has considered the reply of the assessee but not found tenable and the relevant observations of the PCIT after the submission of the assessee is reproduced here in below:

“6. The reply of the assessee has been considered and perused carefully but the same was not found tenable for, the following reasons 6.1 The assessee in its reply stated that the TDS was deducted as per provisions of the Act. It is mentioned that the threshold limit of deducting TDS u/s 194C is Rs.1,00,000/- and u/s 1943 is Rs.30,000/- and no tax is liable to be deducted below the threshold limit and there may be many expenses which might have been grouped under professional/technical consultancy charges and TDS is not liable to be deducted thereon. The assessee also mentioned that merely debiting of any expense on any particular head or grouping thereon cannot be a reason for deduction of TDS. However, the assessee has not furnished/provided single documents in support of its claim. In absence of supporting documents, claim of the assessee that TDS duly deducted on expenses is not accepted. The assessee had deducted TDS on amount of Rs.1,76,27,934/- only remaining amount or Rs. 1,43,91,971/- is short deduction of TDS is liable for addition, therefore, as per provision of section 40 ( a ) (a)(i) 30% of Rs.1,43,91,971/-ie. Rs.43,17,591/- required to be added to the total income of the assessee. 6.2 The assessee in its reply stated that the Profit & Loss account has Rent, Rates & Taxes amounting to Rs.55,45,213/- which is further subdivided into Rent

5 A3logics (India) Pvt. Ltd. vs. PCIT expenses & Statutory expenses amounting to Rs 46,66,650/- and Rs.8,78,565/- respectively. The threshold limit to deduct TDS u/s 1941 in the relevant financial year was Rs.1,80,000/-. During the relevant financial year, rent paid amounting to Rs.12,00,000/- and Rs.33,00,000/- were subject to TDS deduction & the remaining amount of rent paid in different parties were not subject to TDS deduction as these were below the threshold limit of TDS. However the assessee has not furnished/provided any supporting documentary evidences in support of its claim regarding balance expenses were below the threshold limit. The assessee furnished only chart in its reply in support of its claim. In absence of supporting documentary evidences, claim of the assessee that TDS duly deducted on rent expenses is not accepted The assessee had not deducted TDS on remaining amount of Rs.10,45,213/-, therefore, provision of section 40(a)(ia)(v) of the Act is applicable, hence 30% of Rs.10,45,213/- Le Rs.3.13,554/- required to be disallowed and added to the total income of the assessee. 6.3 The assessee in its reply stated that disallowance of late deposit of PF and ESI beyond the limit in respective Act which is applicable w.e.f. A.Y. 2021-22 only which has been amended in the Finance Act, 2021 that the due date shall be considered as the due date of relevant Act. Before the amendment took place w.e.f. A Y 2021-22 therefore, it shall not be applicable for the financial year under consideration. However, as per the provisions of section 36(1)(va) of the Act deductions in respect of any sum received by the tax payer as contribution from the employees towards any welfare fund of such employee is allowed as deduction only, if such sum is credited by the tax payer to the employees account in the relevant fund on or before the due date. For the purposes of this section, "due date" means the date by which the assessee is required as an employer to credit such contribution to the employee's account in the relevant fund under the provisions of any law or term of contract of service or otherwise.Since, as mentioned above, the assessee failed to deposit employee's contribution in the relevant fund on or before the due date, the amount of Rs.20,86,905/- is required to "be disallowed and added back to the total Income of the assessee as per the provisions of section "2(24)(x) r. w. section 36(1)(va) of the Act. 6.4 The assessee in its reply stated that during the course of assessment proceeding the Assessing Officer (AO) admitted out reply regarding disallowance of Rs.1,04,776/-. As the AO considered our reply judicially so it cannot be said that the admission of our contention was erroneous and prejudicial to the interest of revenue. However, on verification of the Form 3CD, it is seen that the Auditor mentioned that payment of Rs.1,04,776/- was paid to RNPOP Enterprises on 09.03.2018 but TDS was not deducted. But assessee in its reply dated 15.01.2021 submitted that the TDS was deducted on above amount and deposited on 07.06.2018. However, no supporting documents has been provided/furnished by the assessee during the course of assessment proceedings as well as proceedings initiated u/s 263. In absence of supporting documentary evidences claim of the assessee not accepted. Therefore, the amount of Rs. 1,04,776 - required to be disallowed u/s 40(a)(i) on account of 6 A3logics (India) Pvt. Ltd. vs. PCIT non-compliance with the provisions of Chapter XVII-B and added to the total income of the assessee.

7. As discussed above, the AO failed to apply his mind and failed to invoke the applicable provisions of law. This in turn has resulted in passing of an erroneous order by the Assessing Officer in the case due to non-application of mind to relevant material and an incorrect assumption of facts which is prejudicial to the interest of the revenue and hence liable for revision under section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/S CIT 243 ITR it has held as under- ".... An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind."

8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 01.02.2021 for A.Y. 2018-19 passed by the AO is held erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the Assessing Officer in a routine and casual manner without applying the applicable sections of the Act. The Assessing Officer has not verified the details which were required to be verified under the scope of scrutiny. The order of the Assessing Officer is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. The AO is required to make necessary verification in respect of the observations made in this order after allowing reasonable opportunity to the assessee.”

“Brief General Facts: The Assessee is actively involved in offering services pertaining to the development of software, maintenance of enterprise servers and related hardware, and providing consultation in the field of Information Technology as well as forward-thinking software development. The majority of 7 A3logics (India) Pvt. Ltd. vs. PCIT the clientele is predominantly based offshore. During the year under consideration the assessee also undertook a construction contract. The assessee has E-filed his return of income for A.Y. 2018-19 on 14.09.2018 showing taxable income of Rs.1,85,52,940/- The case was selected for complete scrutiny where under, various notices were issued which were duly replied by the assessee time to time. However, feeling satisfied, the AO vide the subjected assessment order dated 24.09.2022 held that: “In response to the notices issued, the assessee submitted relevant documents/various details through e-proceedings module on ITBA. The assessee is a Company engaged in the providing services in relation to software, maintenance of servers, IT consulting, offshoring and next generation professional services. During the year the Company undertook a construction of building contract too. After taking into account the facts of the case, the details submitted as well as the explanation offered, the income of the assessee is assessed as under:- Returned Income Rs.1,85.52,940/- Total Assessed Income Rs.1,85,52,940/-.” Later on, through the captioned show cause notice (herein after referred to as the “SCN”) dated 10.02.2023, it is proposed to invoke revisional proceedings u/s 263 of the Act on the ground that captioned assessment order dated 01.02.2021 passed by the AO is erroneous in so far as prejudicial to the interest of Revenue because the AO did not verify/examine the issues which he ought to have made on followings grounds: 1. Under-deduction of TDS on professional /consultancy/technical/legal services 2. Under-deduction of TDS on rent expenses 3. Late deposit of employee's contribution to ESI/PF 4. Non-compliance with provisions of Chapter XVII-B The assessee in response, filed detailed written submission dated 20.02.2023. The ld. CIT, however feeling dissatisfied, rejected the contentions and held the assessment order erroneous and prejudicial to the interest of revenue. Thus the crux of the allegations/conclusions made are: a) The assessee has claimed expenses of Rs. 3,20,19,905/- towards professional/consultancy/technical/legal services, on which TDS was to be deducted as per S. 194J of the Act. However, the assesse had only deducted TDS on an amount of Rs. 1,76,23,934/-. Thus, 30% of the remaining amount of Rs. 1,43,91,971/- i.e. Rs. 43,17,591/- was liable to be disallowed as per provisions of S. 40a(ia)(ii) of the Act and the assessee has not furnished/provided single documents in support of its claim.

8 A3logics (India) Pvt. Ltd. vs. PCIT b) The assessee has claimed rent expenses of Rs. 55,45,213/- on which TDS was required to be deducted as per S. 194I of the Act. However, the assesse had only deducted TDS on an amount of Rs. 45,00,000/-. Thus, 30% of the remaining amount of Rs. 10,45,213/- i.e. Rs. 3,13,564/- was liable to disallowed and added back to the total income as per S. 40a(ia)(v) of the Act and the assessee has not furnished/provided any supporting documentary evidences in support of its claim regarding balance expenses were below the threshold limit. The assessee furnished only chart in its reply in support of its claim c) The assessee had made late deposits of employee’s contribution to ESI/PF, as per the details mentioned in the assessment records. Thus, an amount of Rs. 20,87,257/- was liable to be disallowed as per provisions of S. 36(1)(va) r.w.s. 2(24(x) of the Act. d) While processing the return u/s 143(1) of the Act on 04.01.2019, the CPC had disallowed an amount of Rs. 1,04,776/- u/s 40(a)(i) of the Act on account of non- compliance with the provisions of Chapter XVII-B, but the same was not disallowed by the AO during assessment proceedings.

However, the impugned order passed u/s 263 is completely beyond the scope of S. 263 of the Act on various grounds, as discussed herein below. Hence this appeal. Submissions: 1. Legal Position on S. 263 Judicial Guideline: Before proceeding, we may submit as regards the judicial guideline, in the light of which, the facts of this case are to be appreciated. 1.1 The pre-requisites to the exercise of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (i) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, S. 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue’s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken 9 A3logics (India) Pvt. Ltd. vs. PCIT by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that: "The phrase "prejudicial to the interests of the Revenue" in S. 263 of the Income Tax Act, 1961, has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law." Ratio of these cases fully apply on the facts of the present case in principle.

2. Due verification and examination made: At the outset, it is submitted that the AO acting as a quasi-jurisdictional authority, after making a detailed enquiry and examination of the relevant facts and material available on record to the extent the AO was supposed to make in law, keeping in mind the principles and guidelines settled by the Hon’ble Courts for application of S.68 of the Act, has taken a possible view and completed the subjected assessment. 2.1 In the present case jurisdiction u/s 263 of the Act is on the ground that the while completing assessment proceedings the AO did not verify/examine and assessee failed to submit supporting evidences and documents, on the following issues: 1. Under-deduction of TDS on professional /consultancy/technical/legal services 2. Under-deduction of TDS on rent expenses 3. Late deposit of employee's contribution to ESI/PF 4. Non-compliance with provisions of Chapter XVII-B These balances were appearing in the audited financials of the assessee for the year under consideration. Such observation and allegation made in the show cause notice u/s 263 are not correct in as much as the AO raised specific query through various notices and detailed replies along with documents were produced before the AO: 2.1.1. The AO vide notice dated 17.11.2023 u/s 142(1) of the IT Act (PB 75-77) w.r.t. the issue as under: “With respect to Income for the year under consideration and the claim of refund during the year, kindly submit the below specified details:

10 A3logics (India) Pvt. Ltd. vs. PCIT 1. Furnish computation of income for the relevant AY.

2. Provide a brief note about the nature of business activity carried out by you during the year under consideration.

4. Furnish the statement of set off/adjustment of current year/carried forwarded loss against any income of the year under consideration.

5. Provide the comparison of income reported, deductions/exemptions/rebate claimed, current year/carried forwarded loss set-off/adjusted, advance tax paid, self-assessment tax paid, TDS deducted, total tax paid, refund claimed for the current year under consideration and previous two years.

6. Provide the comparison of sales/turnover, gross profit, net profit, GP ratio, NP ratio for the year under consideration and previous two years.

7. Provide the justification of large refund claimed in ITR vis-a-vis TDS deducted for the assessment year under consideration.

9. Provide the below mentioned details with respect to the amount paid or payable as interest, royalty, fees for technical service during the financial year to a resident: - a) Quantum paid b) Name and address of the person to whom the amount is paid or is payable. c) Details of services for which the amount is payable. d) Date and mode of payment along with supporting documentary evidence. e) Copy of contract, if any. f) Provide the details of TDS deducted and paid on the transaction, and if the same has not been deducted kindly provide justification with supporting documentary evidence. 10.Provide the below mentioned details with respect to the consideration paid or payable during the financial year to non-resident on which equalisation levy is deductible: - a) Quantum paid b) Name and address of the person to whom the consideration is paid or is payable. c) Details of services for which the amount is payable. d) Date and mode of payment along with supporting documentary evidence.

11 A3logics (India) Pvt. Ltd. vs. PCIT e) Copy of contract, if any. f) Provide the details of equalisation levy deducted and paid on the transaction, and if the same has not been deducted kindly provide justification with supporting documentary evidence” the above query of the AO was replied by the assessee vide letter dated 02.12.2020 (PB 78-85). 2.1.2 The AO vide notice dated 06.01.2023 u/s 142(1) of the IT Act (PB 86-87) w.r.t. the issue as under: “Please refer to notices u/s 143(2) dated 21.09.2019 and u/s 142(1) dated 17.11.2020 issued alongwith detailed questionnaire for compliance. Your replies against the above notices were received on 14.10.2019 & 02.12.2020. You are further requested to furnish reply on the following query:

1. 1. After going through your assessment proceedings, it is seen that you have made a payment of Rs.1,04,776/- as ‘Advance payment for repair & maintenance of building’ according to Form No. 3CD at Sl. No. 21(b) submitted by you. But it is seen that no any TDS/TCS has been deducted against this payment. You are requested to please show cause as to why the same should not be disallowed and added back to total income.

2. Please furnish details of ‘Cost of material consumed’ during the year.

3. Please furnish details of ‘Employee benefit expenses’.” The assessee vide letter dated 15.01.2021 relied to the said query letter issued by the AO (PB 88-90).

3. Not a case of complete/total lack of inquiry: The CIT himself admits in the Impugned Order that the AO did make enquiry on the issue in hand. The law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry unless there is an established case of total lack of enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (DPB 9-23) (wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that: “One has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of “lack of inquiry” that such a course of action would be open.” In another case of Narain Singla v. PCIT [2015] 62 taxmann.com 255 (Chandigarh - Trib.) it was held that when AO was fully aware of matter, he had 12 A3logics (India) Pvt. Ltd. vs. PCIT appraised evidences filed by assessee and then had formed a view to accept same, Commissioner was unjustified in invoking jurisdiction u/s 263 of the Act. Whether if there was an enquiry, even inadequate, that would not, by itself, give occasion to Commissioner to pass order u/s 263 of the Act, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. However, the ld. CIT is completely silent on this aspect.

4. S. 263 of the Act Explanation not invoked: Interestingly, the ld. CIT did not invoke Explanation to S.263 which is normally interpreted / taken support by the invoking of S.263 in absence of which, the ld. CIT could not have at all complained of lack of inquiry or not making proper inquiries. Otherwise also he has not suggested what further inquiries could and should have been made in the admitted facts and circumstances of the present case. Supporting Case laws: 4.1 In CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj) held that: “Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard.” 4.2 In ANNU AGROTECH (P) LTD. Vs PCIT, (2021) 214 TTJ (JP) 1118 (DPB 1-7) Revision—Erroneous and prejudicial order—Lack of proper enquiry—Case of the assessee was selected for scrutiny under limited scrutiny for enquiry as to whether the funds received in the form of share premium are from disclosed sources—Assessee's Authorised Representative produced books of account including cash book, ledger, subsidiary records and various other details as required, which were duly examined—AO made all the inquiries, sought clarifications on all the relevant aspects to the extent he was supposed looking to the nature of the issue involved, the past accepted history of the case and the evidences and material already available together with the material provided during the assessment proceedings—Entire details of each shareholder i.e., balance sheet, income declared, transactions done with the assessee-company as also his creditworthiness/financial capacity was duly verified by the AO—CIT has not doubted the ownership of the respective shareholdings by the three shareholders—Thus, the level of the proof required in a normal case of cash credit under s. 68 could not have been applied though the AO did whatever he was supposed in the law to satisfy the requirement of s. 68—There was no evidence, information or anything else indicating that more enquiries were warranted—It was not the case of the CIT that there was a complete/total lack of 13 A3logics (India) Pvt. Ltd. vs. PCIT inquiry—Law is well settled that the assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry—Reason for selection of the case for scrutiny does not speak of s. 56(2)(viib)—Therefore, the AO could not have made enquiries on this aspect—Even otherwise, the assessee also submitted a report of the expert under r. 11UA which fully justified charging premium @ Rs. 50 per share—Hence, the AO was justified in not applying s. 56(2)(viib)—Moreover, once all the details were made available before the CIT, he should have decided the issues instead of setting aside to the AO—Therefore, the order passed by the Principal CIT under s. 263 is quashed. 4.3 In [2016] 76 taxmann.com 226 (SC) CIT v. Reliance Communication Ltd (DPB 8) Held: IT : SLP dismissed against High Court's ruling that where assessee raised funds by way of FCCBs and Assessing Officer made detailed enquiries about genuineness and creditworthiness of actual subscribers to such FCCBs in terms of section 68, mere fact that AO did not make any reference to said issue in assessment order, would not entitle Commissioner to pass a revisional order 5. Adverse Observations and Objections by the Ld. CIT: The other objections are nothing more than a suspicion, particularly when the CIT did not deny that these were old creditors and no fresh /new amount was taken this year. Issues raised are dealt with hereunder: 5.1 With regard to the non-deduction of tax at total payment of Rs. 3.20 Crs. detailed by the CIT at Pg. 1 & 2 and final finding is contained in Para 6.1 Pg. 9 of the order, The Ld. CIT himself admitted that the assesse has made the TDS on the amount of Rs.1,76,26,934/- and it is only the remaining amount of Rs. 1,43,91,971/- there was no short deduction of tax liable for addition. The finding of the Ld. CIT is based on the Tax Audit Report Para 34a (PB 15-16) where under the chart is given under the title “whether the assessee is required to make TDS/TCS” and therein, column no. 5 ask the auditor to show the total amount on which TDS is required and in the next column no. 6 the total amount on which tax was actually deducted. In both these columns the figure of Rs. 1.76 Crs has been shown as the serial no.

14 A3logics (India) Pvt. Ltd. vs. PCIT It is pertinent to note that the tax audit report being prepared and uploaded by the tax auditor who is a qualified chartered accountant not a mere formality but this has got definite objective and purpose and therefore the statutory recognition has been given under the S. 44AB of the Act, so as to provide an ease and assistance to the Assessing Officer who is overburdened. The Ld. Tax Auditor records finding of fact when specific and pointed queries are asked in the Tax Audit Report in Form 3CB/Form 3CD. This is evident from the above Para 34a of the TAR. This implies that in other cases, TDS was not required by the assessee in the opinion of the Ld. Tax Auditor. It was only the amount of Rs. 1.76 Cr. which was found liable for the TDS. The Ld. Tax Auditor has also reported that the assessee was liable to payment of interest u/s 201(A) in Para 34c. 5.2 S. 44AB of the Act has been inserted by the Finance Act, 1984 (21 of 1984), with effect from 1-4-1985, i.e., for and from assessment year 1985-86. The object behind this is explained in circular no. 387, dated 06.07.1984. “17.2 A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of assessing officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the assessing officers thus saved could be utilized for attending to more important investigational aspects of a case.” 5.3.A With regard to similar issue of non-deduction of non/short deduction of Tax (TDS) on pre-payment of rents u/s 194(I), the learned stated the relevant fact in para 3 and concluded in para 6.2 (Page 9) of his order to the effect that though tax was deducted with reference to the payment of Rs. 45 lacs however, w.r.t the remaining amount of Rs. 10,45,203/- no supporting document and evidences were given to support the contention that such payment was below the threshold limit of Rs. 1.80 lac. It is submitted that when the Ld. TA has already examined the factual aspect and found that its only Rs. 45 lacs which is liable for TDS and TDS has been deducted, there was no payment of rental made which required TDS for the reason that the same were below the threshold limit. 5.3.B As regards Rs. 1,04,776 the CIT in Para 6.4 is wrong to say that evidence was not filed. However, the query letter, reply, ledger a/c and challan (PB 69TO 74) proved full application of mind by AO. 5.4 SOP by CBDT followed: It is pertaining to state that CBDT itself has provided circulated Standard Operating Procedures (SOP) for the assessment units to make the assessment u/s 144B under faceless regime vide their communication no. 112/92 dated 03.08.2022 where under, discussing the assessment procedures in para C (initial

15 A3logics (India) Pvt. Ltd. vs. PCIT questionnaire u/s 142), has thereafter prescribed in para C.3 to take due care to ensure “C.3.1 Assessee is not asked to submit documents / information already filed by the Assessee and available on record that is accessible to the AU.” In this case the relevant details were admittedly available on record referred to hereinabove and therefore, following the SOP if the AO didn’t ask for the details of the payments made below the threshold limit of Rs. 30,000 or u/s 194J and of Rs. 1.80 lac u/s 194J of the Act, he committed no error. 5.5.1 With regard to the disallowance of late deposit of PF in ESI discussed in Pr. 6.3 of the ld. CIT didn’t appreciate the legal position that specific amendment was made by the finance act 2021 but with effect from A.Y. 2021-22 and onwards only. This was not applicable on A.Y. 2018-19. There are various decisions supporting this contention. The ld. Tax Auditor hasn’t reported any disallowance on this count. Further the subjected assessment order, in this case was passed on 1.02.2021 when the binding decisions of Hon’ble Rajasthan High Court were available before the ld. AO in the cases of CIT vs State Bank of Bikaner Jaipur (2014 265 CTR 471 (Raj)) CIT vs Jaipur Vidyut Vitran Nigam limited (2014) 265 CTR 62 (Raj) and various other cases of Rajasthan High Court. The AO thus acted in accordance with the law as interpreted by the jurisdictional HC, ITAT which prevailed on the date of the passing assessment order dt. 01.02.2021 hence, no fault can be found in his action and in particular, proceeding u/s 263 cannot be invoked in such a case. 5.5.2 Kindly refer CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 130 Taxman 67/263 ITR 255 (SC) (DPB 48-51) wherein it was held: “In the instant case, the Commissioner had not recorded any reason whatsoever for coming to the conclusion that the Assessing Officer was erroneous in deciding that the power subsidy was capital receipt. Given the fact that the decision of the jurisdictional High Court was operative at the material time, the Assessing Officer could not be said to have erred in law. The fact that the instant Court had subsequently reversed the decision of the High Court would not justify the action of the Commissioner in treating the Assessing Officer's decision as erroneous. The power of the Commissioner under section 263 must be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the revenue. The satisfaction of the Commissioner, therefore, was based on no material, either legal or factual, which would have given him the jurisdiction to take action under section 263. [Para 5].” Also relied CIT, LTU, Bangalore vs. Canara Bank [2021] 123 taxmann.com 207 (Karnataka). Recently this Hon’ble ITAT in the case of Shri Keshoraipatan Sahkari Sugar Mills Ltd. Vs. PCIT (2023) 223 TTJ(Jp) 992 (DPB 29-43) has also quashed an order u/s 263 holding that 16 A3logics (India) Pvt. Ltd. vs. PCIT “Revision—Erroneous and prejudicial order—Lack of proper enquiry—AO allowed deduction under s. 80P(2)(d) on the interest income received by the assessee from co-operative bank—He has examined the issue which is evident from the finding recorded in the assessment order—AO has taken a plausible view—There is no lack of enquiry on the part of the AO and he has applied his mind and allowed the claim to the assessee—Principal CIT did not place on record any apparent error on the part of the AO to substantiate that the order passed by the AO is prejudicial to the interest of Revenue—She has not pinpointed any enquiry which was required to be made but not made by the AO—When the AO has conducted the required enquiry, the order passed by the AO could not be said to be erroneous and prejudicial to the interests of the Revenue—So long as the action of the AO cannot be said to be lacking bona fides, his action in accepting the explanation of the assessee cannot be faulted merely because it could have been lawful to make more detailed inquiries or because he did not write specific reasons for accepting the explanation—Non- mentioning of these reasons did not render the assessment order "erroneous and prejudicial to the interest of the Revenue"—Hence, the impugned revision order is vacated”.

6. Substitution of opinion, not Permissible-Possible view taken by the AO: Thus, the AO certainly did form an opinion by taking a conscious possible decision in view of the facts available on record, investigated by him and the available juridical guideline particularly those binding upon him. It is only after considering all the relevant aspects, relevant facts and the binding decisions, the AO passed the subjected assessment order. However, in the impugned order, the ld. PCIT imposed his own opinion, which shows that it is a case of substitution of opinion and that too without any convincing reason and why and how the ld. AO acted at contrary to the binding decision upon Rajasthan high court and ITAT Jaipur. Since the issue was debateable, merely because the CIT didn’t agree S 263 can’t be invoked held in Elder I.T. Solutions P. Ltd. vs. CIT (2015) 59 Taxmann.com.232(Mum) Thus, the AO has taken a possible view and if a legally possible view has been taken by the AO, the CIT cannot invoke revisionary powers. The revisionary power can be exercised only when there is an error of law or of facts in the subjected order, which must be “prejudicial to the revenue. However, in this case neither there was an error nor any prejudice caused to the revenue, hence, the CIT cannot invoke jurisdiction under S. 263 of the Act. Thus, the AO evidently acted completely in accordance with law, duly and fully applying his mind by calling for all the relevant details and the has taken a possible view particularly in absence of any contrary material or anything raising his suspicion. In view of the above legal and factual position, the proposed action is completely beyond the scope of S.263 of the Act and therefore, deserves to be dropped.

7. Alternatively, and without prejudice to other contention, if the impugned order passed u/s 263 is upheld, the directions given by the ld. CIT are required to be modified to the extent that the assessee must be given full opportunity to paste all legal and factual contentions and arguments.”

5.1 The ld. AR of the assessee has filed following documents in support of the arguments advanced:

S. No. Particulars Pg No. 1 Copy of ROI filed for A.Y 2018-19 along with computation of Total Income 1-5 2 Copy of Tax Audit Report and Audited Balance Sheet and P & L a/c for F.Y 6-63 2017-18 3 Copy of notice u/s 143(2) dated 21.09.2019 along with reply dated 14.10.2019 64-74 and with annexures thereto 4 Copy of notice u/s 142(1) dated 17.11.2020 along with reply dated 02.12.2020 75-85 and annexures thereto 5 Copy of notice u/s 142(1) dated 06.01.2021 along with reply dated 15.01.2021 86-90 6 Copy of SCN dt. 10.02.2023 reply to SCN u/s 263 dated 16.02.2023 91-99 5.2 The ld. AR of the assessee has filed compilation of the following cases laws in support of the contentions so raised :

S. No. Particulars Pg No. 1 Annu Agrotech Ltd v. PCIT (2021) 214 TTJ (JP) 1-7 2 CIT-10, Mumbai vs. Reliance Communication Ltd. (2016) 76 Taxmann.com 8 3 CIT vs. Sunbeam Auto Ltd. (2010) 189 Taxman 436 (Delhi) (Para 13 to 15) 9-23 4 PCIT vs. Shreeji Prints (2021) 130 taxmann.com 294 (SC) Explanation 2363 24-28 cannot be invoked unless opportunity given to assessee (Para 5-7) 5 Shri Keshoraipatan Sahkari Sugar Mills Ltd. vs. PCIT (2023) 223 TTJ (JR) 922 29-43 6 SOP for Faceless Assessment u/s 144B dated 03.08.2022 44-46 7 CBDT Circular No. 387 dated 06.07.1984 47 8 CIT vs. G.M. Mittal Stainless (P.) Ltd. (2003) ITR 255 (SC) 48-51 submission vehemently argued that the assessment of the assessee completed on the faceless regime. The case of the assessee was selected for limited scrutiny whereas the observation of the PCIT goes beyond the issue which were not considered for selection of the case for scrutiny i.e ESI/PF. As regards the TDS on rent the assessee has already deducted the TDS on the amount on which considering the applicable law the TDS is required to be deducted and the left-over amount observed by the ld. PCIT is nothing but the amount on which TDS is not required to be deducted. As regards the other payment made ld. AR of the assessee contended that the assessee is a private limited company is subjected to audit and the tax auditor has already based on their scope of audit considered the expenses debited viz a viz to the liability to deduct the TDS. The Faceless Assessing Office [ herein after “FAO”] has based on the selection criteria undertaken the enquiry and completed the assessment and the assessee cannot be considered as football and therefore, prayed that the order of the PCIT is nothing but extending the scope of the assessment by the PCIT and the same is not permitted. To support the contentions he has relied upon the documents and case law compilation filed.

Principal Commissioner of Income Tax. The case of the assessee was selected for TDS default based on the Computer Aided Selection Scheme of the board and when the specific risk area was flag. The assessee is duty found to submit the required TDS which the assessee fails and therefore, in accordance with the provisions of section 263 of the Act the PCIT is exercising the jurisdiction and in that process it is the assessee’s default in not submitting the full and correct information and if that failure has to compared by the football is not correct approach of the ld. AR of the assessee and the ld. DR strongly objected to such comments. Relying on the detailed questionnaire issued by the ld. AO on 17.11.2023 the assessee failed to give the correct and complete details to the ld. AO. The ld. DR specifically relied upon the question no. 5, 7, 8, 9 & 10 which are related to the criteria only but the assessee failed to submit the full and correct details for which the observation of the ld. PCIT is correct and thus, the order of the FAO is prejudicial and interest of the revenue and therefore, the twin condition to invoke the provision of section 263 is fulfilled. There is not harm if to give the details by the assessee to give the details on the issue and submit the details so as to have the fair chance for the revenue also. As regards the ESI/PF considering the judgment of the apex court it is the duty arguments the ld. DR supported the order of the PCIT.

1. Default in TDS & Disallowance for such default.

2. Refund claim.

The bench also noted that the vide questionnaire dated 17.11.2023 issued u/s. 142(1) of the Act the FAO has raised the following questions so as to examine the same on the selection criteria of the assessee’s case :

5. Provide the comparison of income reported, deductions/exemptions/rebate claimed, current year/carried forwarded loss set-off/adjusted, advance tax paid, self-assessment tax paid, TDS deducted, total tax paid, refund claimed for the current year under consideration and previous two years.

21 A3logics (India) Pvt. Ltd. vs. PCIT e) Copy of contract, if any. f) Provide the details of TDS deducted and paid on the transaction, and if the same has not been deducted kindly provide justification with supporting documentary evidence.

We have also persuaded the reply of the assessee filed on 01.12.2020 where in the assessee is failed to submit the complete details in respect of point no. 8 & 9 raised by the FAO. The reply of the assessee is only related to the TDS made and there is mention on the balance amount of expenditure claimed on which the details of the name of the party and the other details so as to substantiate the claim of the assessee that the same is not liable for TDS even before us the assessee did not find it suitable to contentions of that the assessee on the rest of the payment not liable to deduct the TDS and therefore, when the case of the assessee is selected for specific criteria and the same was properly communicated to the assessee and the assessee with the best reasons known to them failed to file the relevant details to FAO and to PCIT. Not only that the assessee has not deemed it to demonstrate before us the to demonstrate based on the evidence that the contention raised is correct. Thus, when the assessee miserly failed to give complete and correct details on the selection criteria we not find in any infirmity in the finding of the ld. PCIT and the contentions raised by the ld. AR of the assessee that on the balance amount the assessee is not supposed to make the TDS but the same is not supported by evidence and therefore, we are of the considered view that the order passed by the FAO is erroneous and prejudicial to the interest of the revenue. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC) where in on similar fact the observation of the court was as under: 10. In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by 23 A3logics (India) Pvt. Ltd. vs. PCIT the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under section 263(1) was justified.

Since, it is also clear that in this case also the assessee has not placed sufficient material to support the contentions so raised and therefore, respectfully following the finding of the apex court we are of the considered view that based on the facts and reasoning discussed here in above we do not find in the force of the contentions of the assessee and therefore, the appeal of the assessee is dismissed.

In the result, appeal of the assessee is dismissed.

Order pronounced in the open court on 27/09/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 27/09/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- A3logics (India) Pvt. Ltd., Jaipur 2. izR;FkhZ@ The Respondent- PCIT, Jaipur-1