Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri P.M.Jagtap, AM & Sri N.V.Vasudevan, JM ]
Per N.V.Vasudevan, JM is an appeal by the Assessee against the order dated 28.3.2014 of CIT, Kolkata XIX, Kolkata, passed u/s.263 of the Income Tax Act, 1961 (Act) relating to AY 2009-10. 2. The Assessee is a firm of Chartered Accountants engaged in the profession of audit and accounting services in India. For AY 2009-10, the Assessee filed return of income on 30.9.2009 declaring total income of Rs.35,20,57,152/-. The said return of income was revised by filing a revised return of income declaring total income of
2 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 Rs.35,95,93,663/-. Assessment proceedings were completed u/s.143(3) of the Act by an order dated 28.12.2012 determining the total income of the Assessee at Rs.36,03,42,760/-. 3. The CIT, Kolkata-XIX, Kolkata in exercise of his powers u/s.263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue for the following reasons:
According to the CIT in the profit and loss account of the Assessee sundry income of Rs.10,35,13,136/- was credited. According to the CIT the said item of income ought to have been considered as income falling under the head “Income from other sources” and not income under the head “Income from Business or Profession”. According to CIT by accepting the said item of income as “Income from Profession”, the book profit on which deduction of partner’s salary was to be allowed u/s.40(b)(v) of the Act was allowed in excess by Rs.3,68,36,524/-. Under the provisions of Sec.40(b)(v) of the Act, notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", in the case of any firm assessable as such, any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :—
(1) in case of a firm carrying on a profession referred to in section 44AA or which is notified for the purpose of that section—
(a) on the first Rs. 1,00,000 of Rs. 50,000 or at the rate of the book-profit or in case of a 90 per cent of the book- loss profit, whichever is more; (b) on the next Rs. 1,00,000 of at the rate of 60 per cent; the book-profit (c) on the balance of the book- at the rate of 40 per cent;
3 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 profit (2) In the case of any other firm— (a) on the first Rs. 75,000 of the Rs. 50,000 or at the rate of book-profit or in case of a loss 90 per cent of the book- profit, whichever is more; (b) on the next Rs. 75,000 of the at the rate of 60 per cent; book-profit (c) on the balance of the book- at the rate of 40 per cent : profit
Explanation 3 to Sec.40 provides that for the purposes of clause (v) to Sec.40(b) of the Act, "book-profit" means the net profit, as shown in the profit and loss account for the relevant previous year, computed in the manner laid down in Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit.
It can be seen from the aforesaid provisions that the quantum of deduction on account of partners remuneration while computing income from business is based on the book profit. Book profit has been defined as the net profit as computed in accordance with Chapter IV-D of the Act which deals with computation of income under the head “Income from Business or Profession”. Hence, according to the CIT, the nature of income credited in the profit and loss account under the head “Sundry Income” of Rs.10,35,13,136/- assumes importance.
The CIT further noticed that the Assessee had debited a sum of Rs.3,34,56,529/- in the profit and loss account on account of “PWC Global Services Charges”. According to CIT the aforesaid sum ought not to have been allowed as a deduction while computing income from profession as the said expenditure has no direct or indirect nexus in running and functioning of business of the Assessee.
3. The CIT further noticed that a sum of Rs.1,71,40,899/- was debited in the profit and loss account on account of “Accountant Risked Policy Premium”. 3
4 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 This expenditure according to the CIT cannot be regarded as business expenditure allowable as deduction while computing income from profession.
According to the CIT the AO while completing the assessment did not take note of the aforesaid aspects and his failure to examine those points and his action in completing the assessment in a perfunctory manner rendered his order erroneous and prejudicial to the interest of the revenue. Accordingly, the CIT issued a show cause notice dated 6.3.2014 to the Assessee. After hearing the submissions of the Assessee, the CIT passed the impugned order wherein he held as follows: 1. On the sundry income of Rs.10,35,13,136/- credited in the profit and loss account, the CIT was of the view that at the time of passing the original order u/s. 143(3) the then A.O. has not taken any details with respect to income from other sources and his order is also silent on this issue. The A.O. has simply treated this income as the business income. So even if he has rightly or wrongly treated this income as business income the aspect of giving benefit u/s. 40B should have also been seen in the light of the latest Court rulings and the position of Law. As such this lack of enquiry with respect to the discussion as above was definitely prejudicial and erroneous in its nature.
2. As regards PWC Global Charges, the CIT held that no proper enquiries have been made by the then A.O. before allowing this claim of the assessee. The CIT also observed that when the assessment was completed by the AO, the assessee had only furnished a copy of agreement and the AO has simply accepted the same without going into the merits of the same, without investigating the nature of services rendered by the assessee, also without considering, whether these services if at all were between the sister concerns, or related parties having substantial interests with each other, before allowing or disallowing the same and for which the fair market value should have also been considered and taken into account. He held that the order of the A.O. was silent with respect to the various aspects as mentioned above. Hence, to this limited extent also, the order is prejudicial and erroneous to the interest of the revenue hence, show-cause notice u/s.263.
Regarding the aspect of accountant risk policy premium of Rs. 1,71,40,899/- which was claimed and allowed as business expenditure, the CIT again observed that no proper details have been obtained by the A.O. According to the CIT, the A.O. should have called the necessary details and also made the requisite enquiries which as mentioned as above has not been done by the A.O. and hence the order is prejudicial erroneous to the interest of the revenue.
5 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 5. The CIT accordingly set aside the order of the AO on the above issues and directed the AO to pass an order afresh on those issues after giving opportunity of being heard to the Assessee. It is thus clear from the order of the CIT that he had exercised his powers u/s.263 of the Act only on the ground that the AO while completing the assessment proceedings failed to make proper enquiries which he ought to have made and therefore the order of the AO was erroneous and prejudicial to the interest of the revenue. The CIT also observed in the impugned order that in the proceedings u/s.263 of the Act the Assessee had furnished detailed submissions with respect to all the issues and that those submissions deserves to be considered by the AO while passing order pursuant to the order u/s.263 of the Act.
Aggrieved by the order of the CIT, the Assessee has preferred the present appeal before the Tribunal. We have heard the submissions of the learned counsel for the assessee and the learned DR. As already observed the jurisdiction u/s 263 of the Act has been exercised on the ground that the AO while completing the original assessment failed to make proper inquiries which he ought to have made before completing the assessment. It is in this background that the learned counsel for the assessee drew our attention to the inquiries made by the AO while completing the assessment on the issues considered by CIT in the impugned order u/s 263 of the Act.
As far as the sum of Rs.10,35,13,136/- which was shown as sundry income in the profit and loss account is concerned, the AO vide letter dated Nil, (signed by the AO on 1-9-11) along with notice u/s.142(1) of the Act, called upon the Assessee to furnish certain details. Item No.20 of the list of details sought by the AO was the details with regard to “Sundry Income”. The assessee vide its letter dated 25.10.2010 gave explanations and details as desired by the AO. Annexure-III to the said letter gives the break-up of sundry income credited in the profit and loss account. The same is as follows :- Annexure – III Price Waterhouse Details of Sundry Income 5
6 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 Assessment year 2009-10 Rs. Billing to Price Waterhouse Coopers BV 100,260,000.00 Sale of Scrap 283,633.00 Foreign Currency gain/loss 2,969,503.46 103,513,136.46 Total It is the contention of the learned counsel for the assessee that the AO had made due inquiries with regard to the other income credited in the profit and loss account.
On the various components of the other income set out above, the learned counsel for the Assessee submitted that as far as the sum of Rs.10,02,60,000/- which was the payment by Price Waterhouse Coopers to the assessee, it was receipt connected with the business and profession of the assessee. It was submitted by him that the aforesaid amount credited under the head 'sundry income consists of non-refundable grant. The said grant was received by the Assessee from PricewaterhouseCoopers Services BV, a company organised under the laws of the Netherlands ("PWC Services BV"). The learned counsel pointed out that that the Assessee is a member firm of the PricewaterhouseCoopers global network of firms ("PWC Network"). In order to assist in maintaining the network quality standards and methodologies required of all member firms of the PwC Network, PWC Services BV provided the Assessee at its request the subject grant of non-refundable nature during the financial years 2008-09. The said grant has been received by the Firm under the contractual arrangements existing between PwC Services BV and the Firm and amount was remitted by PwC Services BV and received by the Firm through normal banking channels. The aforesaid grant has been provided by PwC Services BV to the Firm, under the aforesaid contractual arrangements, as outright, non-refundable grant to maintain and enhance its resources and capabilities. The said grant amount of INR 10,06,543,633 has been accounted for as 'sundry income' on an accrual basis in accordance with Generally Accepted Accounting Principles in India. It was also submitted by him that the said grant has been offered to tax in computing the total income for the year under consideration as business income 6 7 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 intricately and inextricably linked with the business or profession carried on by the Firm.” With regard to the sale of scrap and foreign currency gain or loss the learned counsel for the assessee submitted that there cannot be any dispute with regard to inclusion of the amounts credited on sale of scrap and recovery of old excess payment in the book profit. So also with regard to gain on account of exchange fluctuation which has to be regarded as income from profession.
Without prejudice to the above contentions, the learned counsel submitted that even if the non refundable grant is assumed to be assessable under the head 'income from other sources' as observed by the learned CIT, the same cannot be legally excluded while arriving at the 'book profit' as per Explanation 3 to section 40(b)(v) of the Act and in this regard placed reliance on the decision of the Hon'ble Kolkata High Court in the case of Md. Serajuddin & Brothers vs. CIT [210 Taxman 84 (Kol)] wherein it was held that on a proper construction of the provisions of section 40(b)(v) and Explanation thereto, book profit comprises the entire net profit as shown in the profit and loss account and not the profits and gains of business assessed under Chapter VI-D.
With regard to the payments made to PwC Global services of Rs.3,34,56,529/- the learned counsel for the assessee pointed out that the Assessee vide its letter dated 8.11.2011 filed before the AO in the course of assessment proceedings and in response to the query by the AO on the details of PWC Global Service Charges, filed copies of relevant invoices, evidence of payment of taxes deducted at source from the amounts payable and copy of the relevant agreement with PWC Global Services under which the aforesaid payment was made by the Assessee. It was thus contended by him that the AO while concluding the original assessment proceedings had duly made enquires with regard to allowability of the aforesaid sum as a deduction while computing income from business and also the quantum and reasonableness of the aforesaid payment. It was submitted by him that the conclusions to the contrary in the impugned order u/s.263 of the Act are incorrect.
8 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 11. With regard to allowability of the aforesaid sum, the learned counsel pointed out that the Assessee had signed a Firm Services Agreement (FSA) with PwC Services BV. PWC Services BV administers the access to and the sharing of a range of services at cost, which include, among other things, the provision of the Audit Transformation Program and costs of developing and monitoring common PWC Network governance and risk management policies and standards, together with network leadership and co- ordination. It was pointed out that under the FSA arrangement no Member Firm has exclusive rights over any underlying assets. If an asset is developed for the benefit of the PWC Network, all Member Firms have a right to access that asset by virtue of sharing in the cost of its development. Access is on a non-exclusive, royalty free basis to all Member Firms. The quality of assurance and audit work sets a standard by which the Member Firms may be judged by their clients. Many of the Firm's clients are leading multinationals. Accordingly, this client base necessitates the exchange of accounting standards, auditing information and. other international accounting information on a PwC Network-wide basis. Services provided under the FSA provide operational support and co-ordination across the key Assurance line of service (LoS) functions which includes, Risk and Quality Management, Learning and Education, Accounting Consulting Services, Audit Transformation Programme, System and Process Assurances, Network Assurance Methodology Group etc. It was submitted by him that given the nature of services rendered by PwC Services BV to the Assessee, there cannot be any doubt that the expenses there for have been incurred by the Assessee wholly and exclusively for the purpose of its business or profession and is accordingly allowable as deduction u/s. 37(1) of the Act while computing the total income of the firm for the year under consideration.
It was submitted that all the said details including agreement were duly considered and examined by the Assessing Officer at the time of the assessment proceedings and having satisfied that the same has been incurred wholly and exclusively for the purpose of the business or profession carried on by the Assessee, he has allowed deduction of 8
9 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 the same in computing the assessed income for the year under consideration. It was contended by him that issues which are accepted, do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/ disallowances are made.
The learned counsel for the assessee brought to our notice that in assessments completed for A.Yrs. 2003-04, 2005-06 and 2006-07 in reassessment proceedings for these years the AO accepted that payments made to Price Water house coopers services are allowable as revenue expenditure in the case of the assessee. The relevant orders of the assessments are placed at pages 225 to 241 and 258 of the assessee’s paper book.
The learned counsel for the assessee further pointed out that the deduction of a sum of Rs.1,71,41,889/- claimed by the assessee on account of Accountant risked policy premium was also allowable deduction. In this regard the learned counsel for the assessee drew our attention to the fact in the course of original assessment proceedings the assessee had vide its letter dated 02.11.2011 gave as Annexure-III to the said letter details of insurance. The details are available at page 187 of the assessee’s paper book. Though AO did not make any specific inquiry with regard to the aforesaid item of expenditure the fact remains that similar item of expenditure had been claimed by the assessee and allowed as deduction by the AO in the earlier assessments done in the case of the assessee in the past. The learned counsel for the assessee also explained that the aforesaid expenditure was incurred by the firm towards payment of premium to guard against risk of any liability that may arise out of professional negligence, omission or mistake. The professional insurance indemnity was taken by the assessee to cover the claims, if any, arising out of the loss or damages during the period of insurance for any breach of professional duty owing to negligence acts committed either by employees firm or its partners. The assessee reiterated its stand that the said expenditure was wholly and exclusively for the purpose of business of the assessee and allowable as deduction while computing the total income. The learned counsel for the assessee 9
10 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 placed reliance on the decision of the Hon’ble Calcutta High Court the case of CIT vs Philips India Ltd. [2015] 64 Taxmann.com 402 (Calcutta) wherein the Hon’ble Calcutta High Court in a case where order u/s 263 of the Act was challenged observed that CIT in exercising the jurisdiction u/s 263 of the Act has to record how in what manner assessment order was erroneous and prejudicial to the interest of the revenue. He drew our attention to the order u/s 263 of the Act and pointed out that the CIT has merely observed no proper details have been obtained by the AO. He has also observed that the AO ought to have called for necessary details and made necessary inquiries. According to him CIT has not set out as to what is the nature of inquiry that has to be carried out by the AO. The learned counsel for the assessee also drew our attention to the fact that similar expenditure had been allowed in the assessments of the assessee in the past. The details in this regard are as follows :-
Assessment Years Insurer Name Order Reference Remarks 2005-06 Cholamandalam MS Original Assessment Allowed in both General Insurance u/s 143(3) original and Co.Ltd. National Reassessment u/s reassessment order as Insurance Co.Ltd. 143(3)/147 revenue expenditure. 2006-07 Cholamandalam MS Original Assessment Allowed in both General Insurance u/s 143(3) original and Co.Ltd. National Reassessment u/s reassessment order as Insurance Co.Ltd. 143(3)/147 revenue expenditure. 2007-08 Cholamandalam MS Original Assessment Allowed in original General Insurance u/s 143(3) order as revenue Co.Ltd. National expenditure. Insurance Co.Ltd. 2008-09 Cholamandalam MS Original Assessment Allowed in original General Insurance u/s 143(3) order as revenue Co.Ltd. National expenditure. Insurance Co.Ltd.
It was submitted by him that in the light of the aforesaid facts exercise of jurisdiction u/s 263 of the Act on this ground cannot also be sustained.
The learned DR reiterated the stand of the CIT as reflected in the order of CIT. According to him the details and other sundry income credited in the profit and loss 10
11 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 account were no doubt obtained by the AO but the AO had not chosen to go into the nature of the income especially in the light of the provision of section 40(b)(v) of the Act. Similar submissions were made with regard to the payments to service charges paid to PWC Global services. According to him the filing of the agreements between the assessee and PwC Global services would not discharge the burden of the assessee for claiming an item of expenditure as deduction. The AO ought to have gone into the question whether the expenditure has any director or indirect nexus with the running of funds of the business of the assessee. With regard to the expenditure on account of Accountant Risked policy premium similar submissions were made and it was argued that the AO never examined this issue while completing the original assessment proceedings. According to him the AO ought to have carried whatever enquiry he had on the above issues to its logical conclusion and given reasons as to why the claim is being accepted. His failure to do so renders his order erroneous and prejudicial to the interest of the revenue.
We have given a careful consideration to the rival submissions. The law with regard to exercise of jurisdiction u/s.263 of the Act on the ground that the AO failed to make enquiries which he ought to have made in the given circumstances of a case is well settled. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts 11
12 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 stated therein are assumed to be correct. We derive support for the proposition as stated above from the decision of the Hon’ble Delhi High Court in the case of Gee Vee Enterprises 99 ITR 375 (Del).
Since in the present case the CIT has exercised jurisdiction u/s.263 of the Act on the ground that the AO while completing the assessment proceeding did not make enquiries which he ought to have made, it is necessary to look into what enquiries the AO made on the issues raised in the order u/s.263 of the Act. It is clear from the submissions and material available on record with regard to the sundry income credited in the profit and loss account the AO made the required inquiries. Though there is no specific reference by the AO on this aspect, yet the fact remains that the AO got the details of the sundry income and in the absence of any adverse observations in the order of AO it is to be presumed that he was satisfied that the income in question had nexus with the business of the assessee and therefore had to be recorded as income from business. There cannot also be any dispute with regard to the fact that the income from sale of scrap, foreign exchange fluctuation gain are inextricably linked to the professioin income and have to be regarded as income from profession. With regard to the payment of service charges to Price Waterhouse Coopers again the required details were filed by the assessee and AO had raised specific queries on these charges. As pointed out by the learned counsel for the assessee similar charges had been allowed as deduction in the past. There was no reason for the AO to doubt the nexus of these expenses with the business of the assessee. With regard to the payment of policy premium to cover the risk of damages owing to professional negligence it cannot be disputed that the same was in relation to the business of the assessee. It is no doubt true that the AO while completing the assessment did not make any specific inquiries with regard to this item of expenditure, the fact, however, remains that these expenses have direct nexus with the business of the assessee and had to be recorded as expenses wholly and exclusively incurred for the purpose of the business of the assessee. Besides the above as rightly pointed out by the learned counsel for the assessee the CIT has not set out as to why this 12
13 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 item of expenditure need to be investigated and as to what type of inquiry ought to have conducted by the AO. A mere observation that no proper details have been obtained, cannot be sufficient to come to a conclusion that the AO did not make proper and adequate inquiries which he ought to have made in the given facts and circumstances of this case. In the conclusion we are of the view that none of the reasons set out by the CIT for invoking the jurisdiction u/s 263 of the Act are sustainable. The impugned order of the CIT has to be quashed for the reason that order of the AO sought to be revised in the impugned order was neither erroneous nor prejudicial to the interest of the revenue for the reason of any law of inquiry that the AO ought to have made in the given facts and circumstances of the case. We accordingly quash the order u/s 263 of the Act and allow the appeal of the assessee.
In the result the appeal of the assessee in is allowed.
This is an appeal filed by the assessee against the order dated 28.03.2014 passed by CIT,Kolkata-XIX, Kolkata relating to A.Y.2009-10.
The assessee in this case is a firm of consultants engaged in the profession of providing financial consultancy, audit and accounting services in India. The assessee in this case filed its return of income on 30.09.2009 declaring total income of Rs.24,84,85,909/-. By revised return filed on 30.03.2011 the total income enhanced to Rs.25,37,78,154/-. The AO by an order dated 28.12.2011 passed u/s 143(3) of the Act determining the total income of the assessee at Rs.25,41,15,580/-. The CIT, Kolkta-XIX in exercising of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue. The reasons given for coming to the aforesaid conclusion was that the claim of the assessee for deduction of Rs.2,13,90,329/- on account of service charges paid to Price water house Global services was not inquired properly by the AO. Another reason was that the assessee had 13
14 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 claimed deduction on account of insurance premium paid to cover the risk of damages payable in the event of any professional negligence or omission etc. These issues are identical to the case of Price Water House which we have discussed in the earlier paragraphs of this order.
The reasons given by the CIT invoking the jurisdiction in this case is as follows :-
“As regards PWC Global Charges, it is seen that in the original order passed by the then AO, no proper enquiries have been made by the then A.O. before allowing this claim of the assessee. From the records, it is seen that the assessee had only furnished a copy of agreement and the AO has simply accepted the same without going into the merits of the same, without investigating the nature of services rendered by the assessee, also without considering, whether these services if at all were between the sister concerns, or related parties having substantial interests with each other, before allowing or disallowing the same & for which the fair market value should have also been considered and taken into account. However, it is seen that the order of the A.O. and the proceedings of the A.O. is silent with respect to the various aspects as mentioned above. Hence, to this limited extent also, the order is prejudicial and erroneous to the interest of the revenue hence, show-cause notice u/s.263. In response to which the assessee has furnished number of submissions. Before considering these submissions, number of enquiries and investigation are essential. Hence the order is set aside with directions to the A.O. to examine all these details before arriving at any particular conclusion and also to give assessee the reasonable opportunity of being heard.
Regarding the aspect of accountant risk policy the assessee has claimed Rs. 97,89,308/- as expenditure. In this regard it is seen that no proper details have been obtained by the A.O. The A.O. while deliberating on this issue should have called the necessary details and also make the requisite enquiries which as mentioned as above has not been done by the A.O. and hence the order is prejudicial erroneous to the interest of the revenue. Hence, the show- notice and in response to which the assessee has furnished number of submissions. The AO is directed to examine all these details before arriving at any particular conclusion and also to give assessee a reasonable opportunity of being heard. And thus this order is set aside with directions to the A.O. as above.”
It is seen that while completing the original assessment the AO have called for the details with regard to the payment of service charges to Price Water house Global services. The assessee had duly replied vide its letter dated 25.03.2014 which are placed 14
15 & 1278/Kol/2014 Price Waterhouse & Lovelock Lewis A.Yr.2009-10 at page 119 of the assessee’s paper book. With regard to the insurance premium paid the details had been given by the assessee before the AO. Though there was no inquiry by the AO we have already seen while deciding the appeal of Price Water house that the absence of such inquiry alone cannot render the order of AO erroneous and prejudicial to the interest of the revenue. The other reasons while deciding the appeal of Price water house will equally apply to this assessee also. For the reasons given while deciding the appeal of Price Water house, we hold that order u/s 263 of the Act cannot be sustained and the same is hereby quashed.
In the result both the appeals are allowed.
Order pronounced in the Court on 11.05.2016.