HEMKUNT SERVICE STATION P.LTD,NEW DELHI vs. DCIT, CIRCLE-10(1), NEW DELHI

The assessee has raised the following grounds:- “

The Ld. PCIT examined the case records and found that the assessee has claimed general expenses of Rs. 11,06,406/- out of which the Ld. AO disallowed 20% i.e. Rs. 2,21,281/-. According to the Ld. PCIT, the assessee has not furnished any supporting evidence in respect of general expenses. Hence, the disallowance of Rs. 11,06,406/- needs to be made. He also found that the Ld. AO has made addition of Rs. 25,21,073/- on account of undeclared profit in respect of which penalty under section 270A for under- reporting of income has been initiated. The Ld. PCIT was of the view that the aforesaid disallowance and addition fall in the definition of misreporting of income and not in the definition of under reporting of income mentioned by the Ld. AO in the assessment order. The Ld. PCIT therefore considered the assessment order as erroneous in so far as it is prejudicial to the interest of the Revenue and issued show cause notice dated 25.02.2022 as to why an order enhancing the assessment be not passed. The assessee company responded by stating that disallowance of 20% of general expenses was made by the Ld. AO after applying his mind, though no specific detail was called for and furnished by the assessee. The Ld. AO disallowed 20% of expenses after fully satisfying himself of the claim of expenditure made by the assessee company, hence, it cannot be concluded that the remaining expenditure was allowed without enquiring into the claim. As regards addition of Rs. 25,21,073/- being the difference between the sales and purchase as per information received from HPCL and as per ledger account of the assessee, it was explained that difference was mainly on account of VAT charged by HPCL in their bills whereas VAT was booked by the assessee under separate head as per accounting policy regularly followed by the assessee. It was submitted before the Ld. PCIT that both the issues were raised during assessment proceedings and the necessary clarifications / 3 documentary evidences were submitted before the Ld. AO which he did not consider properly.

The Ld. PCIT considered the submission/reply of the assessee and in exercise of powers vested in him under section 263 of the Act enhanced the assessment by a sum of Rs. 8,85,125/- being the difference between the claim of Rs. 11,06,406/- made by the assessee under the head General Expenses and disallowance of Rs. 2,21,281/- made by the Ld. AO.

Aggrieved, the assessee is in appeal before the Tribunal and all the grounds relate thereto.

The Ld. AR submitted that during the course of assessment proceedings the Ld. AO had asked the assessee to furnish details of various expenses and the assessee in response, furnished details of other expenses which included general expenses of Rs. 11,06,406/-. Thereafter, the Ld. AO after due application of mind disallowed general expenses to the tune of Rs. 2,21,281/-. Hence the order of the Ld. AO passed under section 143(3) of the Act after due application of mind cannot be deemed to be erroneous and there is no wrong application of law or an incorrect assumption of facts. Hence, revisionary powers under section 263 of the Act cannot be invoked by the Ld. PCIT as twin conditions (erroneous and prejudicial to the interest of Revenue) are not cumulatively satisfied. Conclusion arrived at by the Ld. AO in exercise of his quasi-judicial power vested in him cannot be termed as ‘erroneous’ only because the Ld. PCIT is not satisfied. Reliance was placed on a number of decisions.

The Ld. Sr. DR supported the order of the Ld. PCIT.