VENUS RENT A CAR P.LTD,DELHI V. PR. CIT, DELHI-7, NEW DELHI

ITA 2496/DEL/2022

AI Insights

The case involves Venus Rent A Car Private Limited, which appealed against the order of the PCIT, Delhi-7, under section 263 of the Income Tax Act, 1961, for the assessment year 2015-16. The PCIT had found the original assessment order passed by the AO to be erroneous and prejudicial to the interests of the revenue, leading to a directive for a fresh assessment. The Tribunal examined whether the PCIT was justified in invoking section 263, considering the inquiries made by the AO and the responses provided by the assessee. The Tribunal concluded that the AO had made adequate inquiries and the assessee had satisfactorily responded, thus quashing the PCIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472016 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Other Referred Cases: CIT vs. Sunbeam Auto, Anil Kumar Sharma vs. CIT, Principal Commissioner of Income-tax vs. Clix Finance India (P.) Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: RAJIV SAXENA; SUMANGLA
• Keywords: Depreciation; TDS; Revision of order; Prejudicial to interest
• Section: 143(3); 142(1); 154; 263; 22; 133(6); 40A(3); 194C

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘C’, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA NO. 2496/DEL/2022 A.YR. : 2015-16 VENUS RENT A CAR PRIVATE LIMITED, NO. 2, 100 FEET ROAD, GHITORNI, DELHI – 110 030 (PAN: AADCV0676K) Vs. PR. CIT, DELHI-7, C.R. BUILDING, I.P. ESTATE, NEW DELHI – 2 (Appellant) (Respondent) Date of Hearing 24.03.2025 Date of Pronouncement 02.04.2025 ORDER PER SHAMIM YAHYA, AM : This appeal by the Assessee is directed against the order of the Ld. PCIT-7, Delhi dated 25.03.2021 passed u/s. 263 of the Act which is pertaining to assessment year 2015-16 on the following grounds:- 1. The order passed by Ld. Pr. CIT is bad in law and on facts of case. 2. That on the facts of the case and under the circumstances, the Ld. Pr. CIT has erred in invoking the provisions of section 263 of the Act. 3. That on the facts of the case and under the circumstances, the Ld. Pr. CIT has erred in not appreciating the facts and submission of the assessee that the inadequate enquiry cannot be a ground for invoking the provisions of section 263 of the Act. Assessee by Shri Rajiv Saxena, Advocate, Ms. Sumangla Saxena, Adv., Sh. Shyam Sundar, Adv. & Sh. Dishant Sethi, Adv. Department by Shri Dayainder Singh Sidhu, CIT(DR) 2 4. That the Ld. Pr. CIT has erred in observing that the Assessing Officer has completed the assessment without proper verification and investigation and holding that the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue. 5. That the Ld. Pr. CIT has erred, in ignoring the submissions/ documentary evidence submitted by the assessee during the assessment and revisionary proceedings, and recording factually incorrect finding while holding that the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue. 6. That the Ld. Pr. CIT has erred, in making observation that the payable amount of taxi hire charges payable to Mishra Tour & Travels is Rs. 2.01 Crores whereas as per the audited books of account of the appellant company, the amount payable to the said party as on 31/3/2015 was Rs.20,10,580/- only; and therefore, the very basis of initiating revision proceedings u/s 263 is invalid. 7. That the Ld. Pr. CIT has erred in not appreciating that during the course of assessment proceedings the assessee has filed all the details in respect of the issues raised by the Assessing Officer much before the completion of assessment proceedings and the Assessing Officer has also made proper and meaningful enquiries before taking a final conclusion vis-a-vis framing final assessment. 8. That the Ld. Pr. CIT has erred in terming the order of the Assessing Officer as erroneous and prejudicial to interest of revenue on the basis of surmise and conjectures. 2. The brief facts of the case are that the assessee had filed return of income on 30.09.2015 at an income of Rs. 92,03,290/-. The case of the assessee was selected for Scrutiny Assessment and order under section 143(3) was passed on 12.12.2017 assessing the income at Rs. 92,28,290/-. Thereafter, notice u/s. 263 of the Act was issued to the assessee as in the opinion of Pr. CIT, AO has failed to verify the following issues:- a) To enquire and verify about the expenses incurred on account of hiring of taxies to the tune of Rs. 5.29 crores and to examine the genuineness of these expenses. b) To enquire and verify the cases of cash payment exceeding Rs. 20,000/- u/s. 40A(3) of the Act. 3 c) To verify the hire charges payable of Rs. 2.01 crores by Mishra Tours and Travels and certain its genuineness / correctness. d) To verify whether TDS has been deducted on the payment made to contractors and on account of rent u/s. 194C & 194I of the Act respectively. e) To enquire and examine road taxes payments and its allowability. f) To verify and examine the genuineness of the claim of depreciation on newly purchased cars and its allowability. 3. Ld. Pr. CIT observed that since there was no response from the assessee, hence, he proceeded to direct the Assessing Officer to make a fresh assessment on account of the facts mentioned in the order. Pr. CIT also referred the explanation 2 to section 263 of the I.T. Act, 1961 in this regard. 4. Against the above order, assesse has preferred an appeal before us. 5. We have heard both the parties and perused the records. Ld. Counsel for the assessee made the following submissions:- “It is submitted that the grounds of appeal involve only one issue to be decided by your honours that is whether the Ld. PCIT, Delhi-7 is justified in invoking powers u/s 263 of the Act and holding the assessment made w/s 143(3) dated 12.12.2017, as erroneous and prejudicial to the interest of the revenue inspite of the fact that AO after verifying and satisfactorily examining the documents during assessment proceedings passed the order u/s 143(3) of the Act. It is submitted that in view of above, for exercising revisional jurisdiction u/s. 263 following twin conditions must be met: i. Erroneous order - The order should be erroneous. Thus, if any order is not erroneous it could not be subject to revision w/s 263. ii. Prejudicial to the revenue's interests- The order should be prejudicial to the interests of the revenue. In this regard, it is submitted that the Principal Commissioner of Income tax has erred in invoking the provisions of section 263 as the assessment was 4 framed and accepted by the Ld.AO after having examined the documents furnished. The assessee had filed the relevant documents based on which the AO had accepted and framed the order. A list of documents filed before Ld.AO is tabulated as under: Documents submitted PB (II) Page Copy of Audit Report along with Balance Sheet and P/L for AY 2015-16 1-34 Copy of reply filed on 05.09.2017 and 20.09.2017, submitting the copy of assessment order for AY 2014-15, details of expenses of more than Rs. 5 Lacs incurred including the taxi hire charges, RTO expenses, transport tax and other expenses etc. 41-86 Copy of reply filed on 23.10.2017 submitting photocopies of taxes and fitness charges of the vehicle. 91-118 In this regard, it is submitted that during the assessment proceeding assessee company has furnished all the desired documents as and when asked by Ld. Assessing officer and Ld. AO was satisfied with the response and documents furnished by the assessee and therefore the said assessment was passed by only disallowing the expenditure claimed on account of donation amounting to Rs. 25,000/-, after making proper investigation and enquiry in the instant case. It is necessary to state that for the year under consideration i.e., for AY 2015- 16 reason for selection of case under CASS was \"large other expenses claimed in the Profit and Loss account\" and “low profit shown by transporters, as stated at S No. 22 of the Notice dated 18.01.2017 (PB II, Page 39) issued u/s 142(1) of the Act. It is submitted that this issue was thoroughly examined by Ld. AO during the course of assessment proceeding, as assessee has submitted all the requisite details. Moreover, it is pertinent to mention that Ld. AO also sought the copy of previous assessment order and in this regard copy of assessment order for AY 2014-15 was also placed on record (PB II Page 165- 168), wherein the returned income was accepted after verifying the details and documents furnished. Further from the perusal of notice dated 01.06.2016 (PB II Page 154-155) issued for previous assessment year i.e., for AY 2014-15 your honours would observe that in the said assessment year the CASS reason for scrutiny selection was \"Large other expenses claimed in the Profit & Loss A/c\". Hence, it is submitted that, in both the assessment years the case was selected for limited scrutiny only to verify the expenses claimed in the P/L account and the same was duly verified by the Ld. AO during the course of assessment proceeding and therefore no addition in this regard was made by the Ld. AO in any of these assessment years. 5 It is further submitted that the Ld. PCIT has gone completely wrong by misreading the facts of the case. He misread the hire charges payable to Mishra Tour and Travels as Rs.2.01 crore instead of Rs.22,58,157/- (PB-1 Page 12). This led him to get prejudiced against the order of the Ld. AO and concluded that the AO has failed to verify the account of Mishra Tours and Travel even though the same formed almost 40% of the total hire charges of 5.29 crore. As can be seen from Page 12 of the PB 1. The figure was Rs.23,58, 157/- and not 2.01 crore as misread by Ld. PCIT. Further, Ld. PCIT did not check and confirm the same from the response to his SCN and persisted with the same incorrect view till the end which primarily was the reason for passing of the impugned order. Ld. PCIT also erred in holding that the AO has failed to verify about the expenses incurred on account of hiring of taxis to the tune of Rs.5.29 crores and to examine the genuineness of these expenses as the AO did verify the same by calling for the details. AO was satisfied with the details submitted by the assessee. However, Ld. PCIT seemed dissatisfied that the details pertained to few parties amounting to Rs.l.6 crore. In this regard it is submitted that it is not uncommon in the assessment proceedings to call for the details on a sample basis. Thus, AO had not committed any error by getting satisfied with the quality of the accounts by examining the taxi hire charges paid to few major parties in all totalling to Rs. 1.69 crore out of Rs.5.29 Further the Ld. PCIT has again erred in holding that the AO failed to verify if TDS has been made u/s 194C/1941, without pointing to any specific instance of default in TDS, as the audit report which was already on record contains all this details, and same is the issue related with disallowance u/s 40A(3) of the Act. Ld. PCIT also erred in holding that the Ld. AO failed to verify the road taxes paid, as in the business of plying of taxis on hire, the payment of road tax to the transport department is normal and the same is verifiable and moreover the same involved several payments of small amounts of often less than Rs. 20,000/-. Further Ld. PCIT erred in holding that the AO failed to verify if the vehicles/cars purchased during the month of March were put to use or not, without providing any reasoning for such observation. It is pleaded before your honours that, the due enquiries had been made during the original assessment proceedings vide notices u/s 142(1) of the Act dated 18-01-2017, 04-07-2017, 21-10-2016,07-10-2017 and 21-10-2017, which were duly replied to vide replies alongwith documents submitted on 05-09-2017 (PB II Pg 41 - 86), 23-10-2016 (PBII Pg 91 - 118) as sought for by the Ld.AO during the original assessment following which the assessment was completed u/s 143(3) of the Income-tax Act, 1961. Further subsequently on 09.03.2019 notice under section 133(6) was issued to the principal officer of the assessee company by the Ld. AO seeking the information and documents, on this similar 6 issue. Against this reply along with the documentary evidences were filed on 18.03.2019. Copy of notice u/s 133(6) along with reply filed are placed at pages 122-125 of the PB II. Thereafter notice u/s 154 was also issued on 18.07.2019 and hence it can be safely concluded that sufficient enquiry was made thereafter as well by the Ld. AO and it is clearly not a case of lack of inquiry. Copy of notice issued u/s 154 of the Act is placed at Page 126-127 of the PB II. It would not be out of place to mention Hon'ble Delhi High Court in the case of CIT versus Sunbeam Auto reported in 332 TR 167 has held that the assessing officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction etc. If there was any enquiry even inadequate that would not by itself give occasion to the Ld. PCIT to pass order u/s 263 of the Act, merely because he has different opinion in the matter. The Hon'ble Delhi High Court in the case of Anil Kumar Sharma 335 ITR 83 has held that there is a distinction between \"lack of enquiry\" and \"inadequate enquiry\". If there was any enquiry, even inadequate, that would not by itself given occasion to the Commissioner to pass orders u/s 263 of the Act. It is submitted that only in the case of lack of enquiry i.e., where no enquiry whatsoever has been made by during the time of assessment proceeding, the order u/s 263 of the Act can be passed and if it is a case of \"inadequate inquiry\" i.e., inquiry has been made but that is not to the satisfaction of the Ld. PCIT, the same will not give rise to a situation on the basis of which the order u/s 263 can be passed by the Ld. PCIT. It is submitted that case of instant assessee falls under second situation wherein proper and adequate enquiry during the time of assessment was made by the assessing officer and therefore Ld. PCIT is not justified in revising the order of Ld. AO u/s 263 of the Act. AO has passed the assessment order after diligently carrying out the assessment and there is no reason to assail the same on the pretext of non-application of mind. It is submitted that in order to exercise the power u/s 263 of the Act the Ld. principal CIT has to satisfy the twin conditions as mentioned in the section. In the case of Malabar Industrial Co. Ltd., the Supreme Court held that there must be two conditions namely that the order of assessment is erroneous and that the order is prejudicial to the interests of the Revenue which must be satisfied before the Commissioner may invoke his powers under Section 263 of the Act. In the instant case of assessee the Ld. AO had conducted proper enquiry of the case and all the relevant documents were placed before him during the assessment proceeding therefore it cannot be held that the assessment is erroneous. The relevant para of the above case is cited below. Malabar Industrial Co. Ltd. v. Commissioner of Income-tax, [2000] 109 Taxman 66(SC) \"6. A bare reading of this provision makes it clear that the pre-requisite to 7 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 with 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 ITO 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).\" 18. Further assessee seeks to place reliance in the recent decision of Hon'ble High Court of Delhi in the case of Principal Commissioner of Income-tax v. Clix Finance India (P.) Ltd, [2024] 160 taxmann.com 357 (Delhi), wherein Hon'ble Court observed as hereunder: 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two pronged test to exercise the revisional authority i.e., firstly: the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However; the said Clause or any other condition laid down in Explanation 2 does not warrant recording of the said enquiry or verification in its entirety in the assessment order: 21. Admittedly, in the instant case, the questionnaire dated 02.11.2004, which has been annexed and brought on record in the present appeal, would manifest that the AO had asked for the allowability of the claims with respect to the issues in question. Consequently, the respondent- assessee duly furnished explanations thereof vide replies dated 09.12.2004, 20.12.2004 and 06.01.2005. Thus, it is not a case where no enquiry whatsoever has been conducted by the AO with respect to the claims under consideration. However, this leads us to an ancillary question-whether the mandate of law for invoking the powers under Section 263 of the Act includes the cases where either an adequate enquiry has not been made and the same has not been recorded in the order of assessment or the said authority is circumscribed to only consider the cases where no enquiry has been conducted at all. 22. Reliance can be placed on the decision of this Court in the case of CIT v. Sunbeam Auto Lid.[2010] 189Taxman 436/[2011] 332 ITR 167 (Delhi)/[2009] SCC OnLine Del 4237, wherein, it was held that if the AO 8 has not provided detailed reasons with respect to each and every item of deduction etc. in the assessment order; that by itself would not reflect a non-application of mind by the AO. It was further held that merely inadequacy of enquiry would not confer the power of revision under Section 263 of the Act on the Commissioner. 27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined In Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 19. Thus, based on the aforesaid facts and legal arguments, it is most humbly prayed that the order of Ld. PCIT u/s 263 of the Act dated 25.03.2021 be held to be bad in law as it neither erroneous nor prejudicial to the interest of the revenue, which are essential conditions to invoke section 263 of the Act. Thus, it is most humbly prayed that the order u/s 263 of the Act may kindly be quashed appeal of assessee be allowed.” 5.1 Per contra, Ld. DR submitted that ld. PCIT has directed for further enquiry which is permitted by the amendment made in Section 263 of the Act 6. Upon careful consideration, we find that on the items mentioned by the Ld. PCIT due enquiries have been made by the AO as reflected in the various documents attached in the Paper Books and the replies of the assessee also duly attached in the Paper Book. We have gone through the same. We find that AO has made enquiry, hence, it cannot be said that AO has not made due enquiries in this case. In this regard, we refer the decision of the Hon’ble Delhi High Court in the case of CIT vs. Sunbeam Auto reported in 332 ITR 67 to the proposition that AO in the assessment order is not required to give detailed reason in respect of each and every item of deduction. If there was any enquiry even inadequate that would not by itself give occasion to the Ld. PCIT to pass order u/s. 263 of the Act, merely because he has different opinion in the matter. Furthermore, Hon’ble Delhi High Court in the case of Anil Kumar Sharma 335 ITR 83 has held that there is a distinction between “lack of enquiry” and “inadequate enquiry”. If there was any enquiry, even inadequate, that 9 would not by itself given occasion to the Commissioner to pass orders u/s. 263 of the Act. Examining the present case on the touchstone of the aforesaid cases laws, we find that AO has made due enquiries and replies in this regard were given by the assessee which has been duly reflected in the documents attached in the Paper Books. Furthermore, we note that the Explanation 2 to Section 263 of the Act referred by the Pr. CIT has been inserted by the Finance Act, 2015, which is applicable from the assessment year 2016-17 only. However, the present assessment year being the assessment year 2015-16, hence, applicability of Explanation 2 to Section 263 is not applicable to the present case. The amendment thus cannot empower the PCIT to order for further enquiry as the period is prior to the amendment. So the details were enquired by the AO and duly examined by him, hence, it cannot be said that the order of the AO is erroneous and prejudicial to the interest of revenue. In the background of the aforesaid discussions and respectfully following the aforesaid precedents, in our considered opinion, the order passed u/s. 263 by the Pr. CIT deserve to be quashed, hence, the same is quashed as such. 7. In the result, assessee’s appeal stands allowed in the aforesaid manner. The above decision was pronounced on 02-04-2025. Sd/- Sd/- (VIMAL KUMAR) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER “SRBHATNAGAR Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "