RAJINDER KUMAR SACHDEVA,KARNAL vs. ITO WARD -05, KARNAL

The assessee has raised the following grounds:

Briefly, the facts are, assessee is a resident individual. For the assessment year under dispute, assessee filed his return of income on 26.09.2014 declaring income of Rs.5,12,400. In course of assessment proceedings, Assessing Officer issued notice under Sections 142(1) and 143(2) of the Income-Tax Act,1961 calling for various information and details from the assessee. in response to the such notices, assessee appeared from time to time through his representative and furnished the details called for.

After considering the submission of the assessee and details furnished, the Assessing Officer, while completing the assessment under Section 143(3) of the Act vide order dated 13.09.2016, made the following additions/disallowances:

Before us, learned counsel appearing for the assessee submitted that along with the return of income, assessee had furnished tax audit report containing balance sheet and the profit and loss account with annexures. He submitted, at the time of assessment proceedings, the Assessing Officer from time to time has called for various information and details not only on the expenses incurred but on other issues also.

Drawing our attention to the show cause notice issued under Section 263 of the Act, learned counsel submitted that on the issues referred to by the learned PCIT in the show cause notice, the Assessing Officer has made thorough inquiry at the time of assessment proceedings. Thus, he submitted, in the given facts and circumstances the assessment order cannot be considered to be erroneous and prejudicial to the interest of the revenue. Further, he submitted, in the office note appended to the assessment order, the Assessing Officer has very clearly and categorically stated that he had examined the issues for which the case was selected for scrutiny.

Learned Departmental Representative relied upon the observations of learned PCIT.

We have considered rival submissions and perused the material on record.

The primary issue which requires to be examined is whether the assessment order can be considered to be erroneous and prejudicial to the interest of the revenue in terms with section 263 of the Act. On a perusal of show cause notice issued under Section 263, it is observed that learned PCIT has considered the assessment order to be erroneous and prejudicial to the interest of the revenue due to following reasons: a) Assessing Officer has not examined the issue of disallowance to be made under Section 40(a)(ia) of the Act in respect of commission paid under Section 194A of the Act without deduction of tax at source. b) Assessing Officer has not examined huge increase in various expenses which might have resulted in drastic fall in the net profit rate to 0.83% from 6.85% of last year; c) Assessing Officer has not examined low withdrawal for household expenses; d) Assessing Officer has not examined cash deposits in the bank account maintained with HDFC Bank.

On perusal of materials placed before us, it is observed that the Assessing Officer in course of assessment proceedings has examined each of the issues discussed by learned PCIT in the show cause notice issued under Section 263 of the Act. In so far as alleged non deduction of tax at source on commission paid, it is observed that in course of assessment proceedings, the Assessing Officer has specifically enquired into this issue and in response, assessee had submitted that that such commission was paid to its own employees, hence, such commission being part of their salary is not covered under Section 194A of the Act. In so far as claim of huge expenses resulting in drastic fall in net profit rate, it is observed that in course of the revisionary proceeding itself, assessee has brought to the notice of the learned PCIT the mistake committed by him in considering the net profit of 6.85% in the preceding years and being satisfied with the submissions of the assessee, learned PCIT in paragraph 6.1 has accepted the factual position that the net profit rate in the preceding assessment year was 0.83% and not 6.85%. Thus, the issue of drastic fall in net profit rate due to increase in expenses appears to be on account of factual misconception. As regards the issue of low withdrawal for household expenses, Assessing Officer in course of assessment proceedings has not only examined it, in fact, he has made an addition on that ground. In so far as alleged cash deposits in the bank account, learned PCIT has not brought on record the relevant facts regarding the amount and data of deposits.

Thus, the allegations of learned PCIT are not backed by any evidence. In any case of the matter, after considering the materials placed on record, we are convinced that the Assessing Officer in course of assessment proceedings has examined all the issues and after making proper inquiry, has completed the assessment and made disallowances wherever it was required to be made. That being the factual position on record, the assessment order cannot be considered to be erroneous and prejudicial to the interest of the revenue so as to clothe learned PCIT with the power to exercise jurisdiction under Section 263 of the Act. In the garb of revisionary jurisdiction, the revisionary authority cannot step into the shoes of the Assessing Officer and scrutinize the assessment order with a magnifying glass to find out any small or nonexistent error. Thus, in view of the aforesaid facts, we hold that the impugned order passed under Section 263 of the Act lacks jurisdiction, hence, unsustainable. Accordingly, we quash the order passed under Section 263 of the Act and restore the assessment order.

In the result, the appeal is allwed.