FUTURE PHARMA PVT.LTD,KANPUR V. PR. CIT-1, KANPUR

ITA 263/LKW/2024

AI Insights

The case involves Future Pharma Pvt Ltd, which appealed against the order of the PCIT, Kanpur, revising the assessment order for the assessment year 2018-19 under section 263 of the Income Tax Act, 1961. The PCIT's order was based on the grounds that the original assessment order was erroneous and prejudicial to the interest of the revenue, particularly concerning non-deduction of TDS on commission and directors' remuneration. The Tribunal found that the PCIT had not conducted an independent inquiry and had not adequately addressed the assessee's detailed submissions and the Assessing Officer's comments, leading to the setting aside of the PCIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474475 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Other Referred Cases: CIT v. 8.K. Takriwal, Dish India TV India Ltd. v. ACIT, Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, CIT v. Max India Ltd., CIT v. Embassy Brindavan Developers, CIT v. Vikas Polymers, Vodafone Essar South Ltd. v. CIT, Delhi Airport Metro Express (P) Ltd. v. Pr. CIT, Vodafone Digilink Ltd. v. CIT TDS, Naryan Tatu Rane v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR RAJWANSHI
• Assessee Lawyers: RAKESH GARG
• Keywords: Set aside; Opportunity of being heard; Salary income; Principle of natural justice; TDS; Audit objection; Revision of order
• Section: 143(3); 142(1); 143(2); 263; 192; 153; 13; 44AB; 201(1); 194J; 40a(ia)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW BEFORE SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER AND SHRI SUBHASH MALGURIA, JUDICIAL MEMBER ITA No.263/LKW/2024 (Assessment Year: 2018-19) Future Pharma Pvt Ltd 119/471, Darshan Purwa, Current Address: 119/41, Nasimabad, Darshanpurwa, Kanpur- 208012. v. PCIT-1 Aayakar Bhawan, 16/69, Civil Lines, Kanpur- 208001. PAN:AABCF3392E (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Adv. Respondent by: Shri Sunil Kumar Rajwanshi, Addl. CIT(DR) O R D E R PER ANADEE NATH MISSHRA, A.M.: (A) This is an appeal filed by the assessee against the impugned order of the Ld. Principal Commissioner of Income Tax [hereinafter referred to as the “PCIT”], Kanpur dated 31.03.2024 for assessment year 2018-19 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”). The grounds of appeal of the assessee are as under: - “1. Because the PCIT, Kanpur-1 has erred on facts and in law in setting aside the order passed u/s 143(3) of the Act, 1961 holding it to be erroneous and prejudicial to the interest of the revenue which is contrary to facts and to the provisions of law, the order passed u/s 263 be quashed. 2. Because the order passed u/s 143(3) r.w.s. 144B dated 21.04.2021 passed by the AO is neither erroneous nor prejudicial to the interest of the revenue, the PCIT has erred on facts and in law in holding it to be otherwise, the order passed u/s 263, be quashed. ITA No.263/LKW/2024 Page 2 of 16 3. Because the order passed u/s 143(3) r.w.s. 144B was the result of the case being selected under CASS and the assessment being framed after deep scrutiny accompanied with detailed questionnaire, all the issues being examined, the PCIT has erred on facts and in law in holding the same to be erroneous and prejudicial to the interest of the revenue, the order passed u/s 263 is bad in law, be quashed. 4. Because the order passed u/s 143(3) r.w.s. 144B, having being passed after scrutiny of the accounts and the documents filed is neither a case of no enquiry nor lack of enquiry or inadequate enquiry, the order passed by the PCIT u/s 263 is bad in law, be quashed. 5. Because the PCIT has failed to make any independent enquiry which is the core mandate of section 263 nor has demonstrated as to how the order is erroneous or prejudicial to the Interest of revenue, failure to conduct independent enquiry by the PCIT makes the order passed u/s 263 bad in law, the same be quashed. 6. Because without prejudice to the above, on merits the case, return was selected under CASS to examine large commission expenses and low net profit, that matter being thoroughly examined and_ disallowance of Rs.2,40,442/- having being made out of commission made, it is incorrect on the part of the PCIT to state that the matter regarding commission was not examined by the AO, the order passed by the PCIT is bad in law, be quashed. 7. Because on perusal of the notice issued u/s 263, it is not appreciable on the part of the PCIT to state that no audit report in the prescribed Form 3CD was filed which report was filed alongwith the return on 28.10.2018 which inter-alia contains all the relevant information vis-a-vis commission and salary paid alongwith details of applicability’ of section 40A(2)(b) and TDS u/s.194H/194), if any, which were examined by the AO, thus to say that the AO failed to examine the same, would be incorrect, the order passed by the PCIT be quashed.” 8. Because complete details were furnished as raised in the questionnaire as issued to the notice issued u/s 142(1) and the AO having examined the issue in detail, being satisfied, framed the assessment, the expenses claimed are neither unverifiable nor incurred for purposes other than business and there being no finding by the PCIT contrary to the finding of the AO, the order passed u/s 263 being devoid of merit, the same be quashed. 9. Because without prejudice to the above grounds of appeal, the PCIT has not justified in setting aside the entire order to be framed afresh, as against the specific issues raised, the order passed by the PCIT is bad in law be set-a-side/quashed.” (B) In this case, assessment order dated 21.04.2021 was passed by the Assessing Officer under section 143(3) read with section 144B of the Act; whereby the assessee’s total income was determined at Rs.3,07,679/- against returned income of Rs.67,237/-. Subsequently, the assessment order was revised by ITA No.263/LKW/2024 Page 3 of 16 the Ld. PCIT vide aforesaid impugned order dated 31.03.2024 passed under section 263 of the Act. Prior to the aforesaid order dated 31.03.2024 passed under section 263 of the Act, a show cause notice dated 08.12.2023 was issued to the assessee, the relevant portion of which is reproduced as under: - “On perusal of record, It is noticed that in Profit and Loss Account assessee company had debited the sum of Rs. 70,06,972/- towards commission and Rs. 23,04,000/- towards directors remuneration. The assessee was liable to deduct TDS u/s 194H and 194J of IT Act, 1961 but the same was not done. The copy of 3CD is also not placed in file. Hence, 30% of the above said amount Rs. 27,93,292/- [(30% of Rs. 93,10,972) (70,06,972/- + 23,04,000/-] was required to be disallowed and added back to the total income of the assessee. The AO has not examined the issue of deduction of TDS u/s 194H and 194J of IT Act, 1961 of the Act on payment of Rs. 93,10,972/- (70,06,972/- plus 23,04,000/-) on commission and directors remuneration. From the above, it is clear that the AO has failed to examine the issues/facts while completing the assessment. In view of above facts, the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue and is liable to be set aside under the provisions of section 263 of the I.T. Act 1961. You are hereby given an opportunity to explain as to why the assessment order passed by the Assessing Officer should not be set aside and a fresh order may be passed in light of above observations as material available on record. You are required to submit your replies and explanations on or before 22.12.2023; before the undersigned by online mode or mail at Kanpur.pcit1 @ incometax.gov.in. In case you do not file any reply/explanation, it shall be presumed that you have nothing to say in this regard and the decision in the matter will be taken as per the provisions of the Act as well as on the basis of material available on records.” (B.1) The date of compliance for the aforesaid notice dated 01.12.2023 was fixed on 22.12.2023. The assessee filed replied through e-proceedings on 02.01.2024 and also submitted a copy of reply in the office of Ld. PCIT on 08.01.2024. The submissions made by the assessee did not find favour with the Ld. PCIT and she went ahead to pass the aforesaid impugned order dated 31.03.2024 under section 263 of the Act; thereby setting aside the aforesaid assessment order dated 21.04.2021 and directing the Assessing Officer to pass a fresh assessment order. The ITA No.263/LKW/2024 Page 4 of 16 relevant portion of the impugned order of the Ld. PCIT is reproduced as under: - “I have carefully gone through the submission made by the assessee company as well as the case records. The submission of the assessee company is not found tenable as per the reasons enumerated as under: 1. Commission payment: The detail provided by the assessee company shows that the assessee had claimed commission of Rs. 70,06,972/- in P & L a/c out of which Rs 16,02,953/- was shown as payable. The AO disallowed Rs 2,40,442/- as estimated not to have been incurred for business purposes. On the payment of Rs 54,04,019/- only Rs.337,324/- has been deducted on commission paid to 34 persons. On the remaining payment to 58 persons TDS has not been made on the ground that the amount paid individually was less than Rs 15,000. The company has neither provided details of such recipients nor has the FAO sought details to identify such Persons and verify the genuineness of such payments. Director remuneration In reply, the assessee company has submitted that it has paid salary to its director to the extent of Rs. 9,84,00/- during the year- Lokesh Gupta Rs.8,40,000/- Krishan Gopal Gupta Rs.1,44,000/- Total Rs.9,84,000/- In the account ‘salary and wages salary of following employees was also debited: Richa Gupta Rs.6,00,000/- Pratima Gupta Rs.3,60,000/- Om Gupta Rs.3,60,000/- Total Rs.13,20,000/- On perusal of case records, it is noticed that the FAO has not made necessary verification to ascertain genuineness of payment of salary to employee to the extent of Rs. 13,20,000/-. Before allowing the aforementioned expenses, the FAO was required to verify that services had been actually rendered by such person to whom salary was paid. Further, the FAO needed to ensure that the above employees were not covered under Section 40A(2)(b) of the I.T. Act, 1961. In view of the facts mentioned above, it is clear that the assessment order passed by AO is erroneous as well as prejudicial to the interest of the revenue. Accordingly, in exercise of the power u/s 263 of the IT Act, 1961 I set aside the order passed by the FAO u/s 143(3) r.w.s 144B of IT. Act, 1961 on 21.04.2021 for A.Y. 2018-19. The Assessing Officer is directed to pass a fresh assessment order, after considering all the facts of the case and the Observations above and after providing an opportunity of being heard to the assessee, within the time limit as given in the Income Tax Act, 1961.” ITA No.263/LKW/2024 Page 5 of 16 (B.2) For the ease of reference, the written submissions filed by the assessee in the office of the Ld. PCIT are also reproduced as under: - “The impugned notice u/s 263(1) has been issued for the following reasons:(1) In the profit and loss account assessee company had debited the sum of Rs.70,06,972/towards commission and Rs.23,04,000/- towards directors remuneration. (2) The assessee was liable to deduct TDS u/s 194H and 194J of the of the Income tax Act, 1961 but the same was not done. (3) The copy of 3CD is also not placed in file. (4) Hence, 30% of the above said amount of Rs.27 ,93,292/- [(30% of Rs.93, 10,972) (70,06,972/+ 23,04,000/-] was required to be disallowed and added back to the total income of the assessee. (5) The Assessing Officer has not examined the issue of deduction of TDS u/s 194H and 194J of the Income Tax Act, 1961 of the Act on payment of Rs.93,10,972/(70,06,972/plus 23,04,000/-) an Commission and directors remuneration. (6) The Assessee officer has failed to examine the issues/ facts while completing the assessment. Therefore the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. In this regard it is submitted as follows: 1. The case relates to AY 2018-19. The assessee which is a company e- filed its return of income on 28/10/2018 declaring total income of Rs.67,237/-. The Tax Audit Report, in Form 3CD u/s 44AB of the Income Tax Act, 1961, was also filed on 28/10/2018. Copy of acknowledgement of filing tax audit report in Form 3CD is enclosed as Annexure -1. The return was selected for scrutiny, accordingly notice u/s 143(2) was issued on 23/09/2019. Thereafter notice u/s 142(1) was issued on 27/11/2020 raising various queries and further query were raised vide letter dated 20/01/2021. Copy of notice u/s 142(1) dated 27/11/2020 is enclosed as Annexure-2 and copy of letter dated 20/01/2021 issued by Assessing Officer is enclosed as Annexure-3. That para 5 and 7 of the notice dated 27/11/2020 are reproduced herein under: ITA No.263/LKW/2024 Page 6 of 16 “Para 5. With respect to the commission expenses claimed during the year under consideration, kindly submit the below specified details: Copy of financials in the form of balance sheet, P & L account, tax audit report. Name, PAN, Address of the party to whom the commission has been paid. e Copy of agreement, if any. Provide following details of sale/ purchase with respect fo which the commission has been paid: 1. Date of sale/ purchase 2. Name, PAN, address of the party to whom the sale/ purchase has been made. 3. Nature of the item 4. Quantity Para 7. Provided following details of the commission paid: e Basis for current year. Basis for last year. Date on which commission has been paid. Amount TDS deducted.” 3. That in response to the query at SI. No.5 and 7, the assessee filed complete details vide letter e-filed on 31/01/2021 alongwith complete detail of party wise commission paid and tax deducted thereon together with date of deposit of TDS. A perusal of the detail would show that assessee company has deducted tax at source u/s 194H where ever applicable i.e. in those cases where commission paid to the party is less than Rs.15,000/no tax was deducted in accordance with provision contained in section 194H. The aforesaid details were placed at Annexure B of the reply. Extracts from reply e-filed on 31/01/2021 are also reproduced herein below: “Point No.7 1. ...................................... 2. In respect of commission expenses claimed in the accounts of the company, the assessee disclosed gross sales of Rs.2,93,97,138.37/-. From the list of parties to whom goods were sold and as furnished by assessee. Among the various expenses incurred and claimed as deduction included in the profit & loss accounts was Rs.70,06,972/- towards commission. The list/details of payments made for commission and the date on which the TDS, has been paid, is being enclosed, as per Annexure-B. ITA No.263/LKW/2024 Page 7 of 16 3. It is the company’s policy to pay the agents commission through cheques, after deducting the applicable TDS. The company deposits the returns, for the amount of TDS deducted by it, after taking PAN of the agents to whom the commission has been paid. 4. According to income tax TDS is the primary condition for allowing a business expense as deduction and if an expense is not subjected to TDs as required as per the provisions of chapter-XVII of the Ac such expense under certain conditions are liable to be disallowed u/s 40 (a)(ia) of the Act. And the secondary conditions to be satisfied for claiming deduction of a business expense a business expense shall be allowed as ‘deduction if it is of revenue in nature and ex: ended wholly and exclusively for the purpose of business. Thus it is in practice to pay commission after deducting applicable TDS. The same can be verified from the income tax records and returns submitted by us (TDS return).” Copy of reply filed on 31/01/2021 alongwith relevant extract from Annexure ‘B’ is enclosed as Anenxure-4 (in case if required, complete annexure is available on the Income Tax Portal). 4. On examination of the aforesaid details the Assessing Officer in the assessment order disallowed 15% of the amount shown as commission payable as on 31/03/2018 at Rs.16,02,953/- (Total commission debited in books was Rs.70,06,972/-. Out of the aforesaid sum, Rs.54,04,019/- was paid during the year and Rs.16,02,953/- was outstanding as payable as on 31/03/2018, it is out of the latter amount that 15% was disallowed). 5. Therefore the allegation in the show cause notice, issued u/s 263, that the Assessing Officer failed to examine the issue relating to deduction of tax on commission u/s 194H is contrary to facts on record. 6. That as regards Director's remuneration, it is submitted as follows: There are three directors in the company: (a) Mr. Lokesh Gupta (b) Mr. Krishan Gopal Gupta (c) Mr. Manoj Gupta 7. Out of the above three directors, only two Directors were paid salary as follows: Lokesh Gupta Rs.8,40,000 Krishan Gopal Gupta Rs.1,44,000 Total Rs.9,84,000 The accounting system followed by the assessee in respect of payment of salary & wages is as follows: (i) Salary of directors and other employees (excluding Medical representatives) is debited under the head “salary & wages others’ ITA No.263/LKW/2024 Page 8 of 16 (ii) Salary of Medical representatives is debited under the head “Salary A/c (M.R.) others’. (iii) Incentives to Medical representatives is debited under the head Incentive. In the account ‘salary & wages other” apart from salary to directors Rs.9,84,000/-, salary of following employees was also debited: Richa Gupta Rs.6,00,000/- Pratima Gupta Rs.3,60,000/- Om Gupta Rs.3,60,000/- Total Rs.13,20,000/- In view of above facts, Director’s remuneration is Rs.9,84,000/- and not Rs.23,04,000/-. 8. During the course of assessment proceedings the Assessing Officer vide his letter dated 20/01/2021 (already enclosed as Annexure-3), required following details from the assessee: “1. Kindly provide the ledger copy of the Salary & Wages and commission paid to your staffs/agents. If anyone received an amount of Rs.50,000/- and above per month as a Salary/Awvages/commission, kindly submit his/her or its PAN, e-mail and proper address.\" Apart from above details and some other details, detail of TDS payable as on 31/03/2018 alongwith date of payment of TDS was also required by the Assessing officer. 9. The assessee accordingly vide its reply e-filed on 03/02/2021 filed the ledger account of “salary & wages (other)” which included Director's remuneration apart from other accounts relating to salary and wages at As regards salary to Directors, tax was deducted thereon u/s 192 which was accepted by the Assessing Officer. The contention In the show cause notice Issued u/s 263 that tax should have been deducted u/s 194J is not based on fact as the directors are Key Managerial Personnel of the company (kindly refer note 28 of the Audited financial Statement) engaged full time with the company where employer employee relation exists. Further still the said Directors i.e. Mr. Lokesh Gupta and Mr. Krishan Gopal Gupta are income Tax aseessee and they have filed their Income Tax Return for AY 2016-19, declaring therein income from salary. A perusal of their computation of total income will show that three persons have no other engagement except employment with Assessee Company. it will also be seen that case of Mr. Lokesh Gupta there ie a refund due of Rs.23,640/- as against Tax deducted by assessee company of Rs.37,000/-. in case of Mr. Krishan Gopal Gupta, his salary was Rs.1,44,000/- frorn assessee company therefore no tax was deducted, however in his return too there is a refund of Rs.3,810/against Tax deducted at sources of Rs.13,013/- by Bank on interest income. ITA No.263/LKW/2024 Page 9 of 16 Copy of computation of total income and acknowledgement of filing return of Mr. Lokesh Gupta and Mr. Krishan Gopal Gupta are enclosed and collectively marked as Annexure-8. 15. Presuming without admitting in any manner, even if tax was deductible u/s 194) and assessee has wrongly deducted tax u/s 192, then too no disallowance u/s 40a(ia) could be made as it is not a case of failure to deduct & deposit tax but a case of deduction under a wrong section In its aforesaid averments assessee places reliance on following decisions: (i) CIT v. 8.K. Takriwal (2014) 361 ITR 432 (Cal) (ii) Dish tndia TV India Ltd. v. ACIT (2017) 86 Taxmann.com 177 (Mum- Trib). Further still the deductees (director) have filed their Income Tax returns and as can be seen from their return of income (refer para 14 hereinfore and Annexure-7) refund is due in their cases. Therefore also no disallowance could be made u/a 40a(ia) as assessee company is not deemed to be default under the first proviso to section 201(1) — kindly refer second proviso to section 40a(ia) as reproduced hereinfore. 16. That a perusal of submissions at para 13 to 15 would show that on facts too no disallowance u/s 40a(ia) could be made. In any way it is clear that no prejudice has been caused to the revenue. 17. That the allegation that tax Audit Report in form 3CD is not available on file appears to be inadvertently mentioned as the assessee e-filed the same on 28/10/2018 (acknowledgement enclosed as Anenxure-1) and same is available on the Income Tax Portal. 18. That a perusal of above facts would show that the assessment order dated 21/04/2021 made u/s 143(3) is neither erroneous nor prejudicial to the interest of revenue as enquiry has been made by the Assessing Officer on the issues raised in the impugned notice, issue u/s 263, and all such enquiries were responded to by the assessee. Even on facts no prejudice has been caused to the revenue and the order is not erroneous. The Assessing Officer has passed the assessment order after considering all the material on record and upon due application of mind. Therefore it is requested that the proceedings initiated u/s 263 may kindly be dropped. The assessee places reliance on the following propositions in law as settled in various judicial rulings: (i) Malabar Industrial Co. Ltd. v. Commissioner of Income Tax 243 ITR 83 (SC) A bare reading of section 263(1) makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests 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 one of them is absent - if the order of the [TO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or ITA No.263/LKW/2024 Page 10 of 16 error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. 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. The phrase ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an 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 an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the [TO is unsustainable in law. That where there are two views possible and Assessing Officer has taken one of the possible view, the order of Assessing Officer cannot be said to be erroneous or prejudicial to the interest of revenue as held by Hon'ble Apex Court in the case of CIT v. Max India Ltd. [2007] 295 {TR 282; Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); CIT v. Embassy Brindavan Developers (2023) 153 taxmann.com 461 (SC). That if no enquiry was made by the Assessing Officer, the Commissioner would have jurisdiction u/s 263 but if enquiry was made by the Assessing Officer and the objection of the Commissioner is that such enquiry is not adequate the Commissioner would have no jurisdiction u/s 263, as held in the case of Hindustan Marketing and Advertising Co. Ltd. [2012] 341 ITR 180 (Delhi), CIT v. Leisure Wear Exports Ltd. [2012] 341 ITR 166 (Delhi). Where querry was raised during the course of scrutiny which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not, by itself, lead to the conclusion that the order of the Assessing Officer called for interference and revision as held in the case of CIT v. Vikas Polymers [2012] 341 ITR 537 [2010] 194 Taxman 57 (Delhi). Lack of any discussion in the assessment order cannot lead to the assumption that the Assessing Officer did not apply his mind as held in the case of CIT v. Vodafone Essar South Ltd. [2012] 28 taxmann.com 271/[2013] 212 Taxman 184 (Delhi). Where the issues were duly considered by the assessing Officer and he had taken a plausible view on the issues based on existing proposition of law revision was unjustified. In the aforesaid proposition assessee places reliance on the decision of the ITAT Ahemdabad in the case of Comtrade Commodities Services Ltd. v. Pr. CIT (2023) 156 Taxmann.com 369 (Ahemdabad-Trib). When the Pr. CIT has not been able to establish through his enquiry that the order passed by Assessing Officer is unsustainable in law and more over the view taken by the Assessing Officer is a plausible view which ig supported by judicial precedents; the assessment order cannot be erroneous though prejudicial to the interest of Revenue. As both ingredients do not stand fulfilled of being erroneous and prejudicial to the interest of Revenue the initiation of proceedings u/s 263 in bad in law as ITA No.263/LKW/2024 Page 11 of 16 held by Hon'ble ITAT Delhi in the case of Delhi Airport Metro Express (P) Ltd. v. Pr. CIT (2017) 88 taxmann.com 767. Even if it was assumed that the Assessing Officer did not make any enquiry about loan or credit balance of partners, the order of the Assessing Officer may be erroneous but if the loans and credits balance of the partners were genuine for which the assessee produced evidence before CIT in course of proceedings u/s 263, the order of Assessing Officer cannot be said to be prejudicial to the interests of the revenue. Therefore the action of CIT is not valid as held in the case of CIT v. Vikas Polymers 341 ITR 537 (Del). Vodafone Digilink Ltd. v. CIT TDS 2017 87 taxmann.com 315 (Delhi-Trib). The facts of the above case are that Assessee Company is engaged in providing telecommunication services. The company paid roaming charges to other telecom operators without deducting tax at source. It was the case of the appellant company that roaming payments made to other telecom operators for allowing use of their network were in nature of provision of standard facility which did not involve any human intervention, therefore such payments could not be classified as FTS. The Hon'ble Tribunal held that where the Assessing Officer has taken one of the plausible view after enquiry and the CIT has also not appreciated the fact that other telecom operators, to whom roaming charges have been paid, would have offered income arising from roaming charges received from the appellant to tax causing no prejudice to the revenue, therefore initiation of proceedings u/s 263 was bad in law and void ab inito. Assessee also places reliance on the observations of Hon'ble ITAT, Mumbai Bench in the case of Naryan Tatu Rane (TS-290ITAT 2016 (Mum) (2016) 70 taxmann.com 227 wherein it was observed that explanation to Section 263(3) cannot be said to have overridden the law interpreted by various High Courts (which held that before holding Assessing Officers order to be “erroneous” necessary enquiry and verification should be made). It further observed that if Revenue’s action was approved, “then the Ld. Pr. CIT can find fault with each and every assessment order. He can also force the Assessing Officer to conduct the enquiries in the manner preferred by Ld. Pr. CIT, thus prejudicing the independent application of mind of the Assessing Officer.\" ft held that the explanation does not provide unfettered rights to Pr. CIT to revise each and every order. In view of above facts and legal propositions it is requested that proceedings initiated under impugned notice dated 08.12.2023 may kindly be dropped. We would be glad to furnish any further information that may be required by your kindself.” (B.3) In the course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT” for short), the following particulars were filed from the assessee’s side: - ITA No.263/LKW/2024 Page 12 of 16 (B.4) On perusal of the records, it is found that the assessee had obtained a copy of letter dated 01.01.2024 of the Assessing Officer, containing the Assessing Officer’s comments on the aforesaid submissions made by the assessee during the proceedings under section 263 of the Act in the office of the Ld. PCIT. The relevant portion of the aforesaid letter dated 01.01.2024 reproduced as under: - ITA No.263/LKW/2024 Page 13 of 16 ITA No.263/LKW/2024 Page 14 of 16 (C) At the time of hearing before us, the Ld. Counsel for the assessee drew our attention to the contents of paper books [already mentioned in foregoing paragraph no. (B.3)]. In particular, he drew our attention to the written submissions filed from the assessee’s side in the office of the Ld. PCIT, in the course of proceedings under section 263 of the Act (relevant portion of which have already been reproduced in foregoing paragraph no.B.2). He further contended that the impugned order under section 263 of the Act has been passed by the Ld. PCIT on the basis of audit objection, without applying her own mind. He also contended that the Ld. PCIT did not conduct independent inquiry herself, in the course of proceedings under section 263 of the Act. Furthermore, he contended that in view of the aforesaid submissions, the impugned order under section ITA No.263/LKW/2024 Page 15 of 16 263 of the Act should be quashed. The Ld. Departmental Representative relied on the impugned order dated 31.03.2024 passed by the Ld. PCIT. (C.1) We have heard both sides. We have perused the materials on record. On perusal of the impugned order under section 263 of the Act, it is found that the Ld. PCIT has acknowledged the receipt of the written submissions along with the details in supporting the documents filed by the assessee during the proceedings under section 263 of the Act. She has also confirmed that she had gone through the case records. Despite this, it is found that there is no discussion of the specific points raised in the written submissions filed by the assessee in the course of proceedings under section 263 of the Act. It is also found that the Ld. PCIT has not factored in the aforesaid letter dated 01.01.2024 of the Assessing Officer (relevant portion of which have already been reproduced in foregoing paragraph no. B.4), while passing the impugned order under section 263 of the Act. The order passed by the Ld. PCIT is scanty in details and perfunctory in nature; providing only cursory and fleeting coverage of the issues at hand. Further, the impugned order dated 31.03.2024 passed by the Ld. PCIT under section 263 of the Act was passed on 31.03.2024, which was the last date, after which bar of limitation would have applied. The order seems to have been passed by the Ld. PCIT in hasty manner, to avoid the bar of limitation, without dealing with issues at hand adequately. In view of the foregoing, and in the specific facts and circumstances of the present case; the impugned order dated 31.03.2024 passed under section 263 of the Act is set aside and the Ld. PCIT is directed to pass denovo order; if so deemed fit in accordance with law, after providing ITA No.263/LKW/2024 Page 16 of 16 reasonable opportunity to the assessee and after taking the Assessing Officer’s aforesaid letter dated 01.01.2024 as well as the assessee’s aforesaid written submissions into consideration, and after providing reasonable opportunity to the assessee. The Ld. PCIT will be at liberty to drop action under section 263 of the Act, if in his view, revision of assessment order under section 263 of the Act is not warranted in the facts and circumstances of the case. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 18/03/2025. Sd/- Sd/- [SUBHASH MALGURIA] [ANADEE NATH MISSHRA JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18/03/2025 Vijay Pal Singh, (Sr. PS) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard file By order //True Copy// Assistant Registrar "