Case Law Details
M/s SRL Diagnostics Pvt. Ltd. Vs PCIT (ITAT Mumbai)
Mere finding the assessment order is erroneous does not give power to Ld. PCIT to annul the assessment order. It is duty imposed by the provision of section 263 that Ld. PCIT has to determine and satisfy both the conditions that the order passed by AO is erroneous in so far as it is prejudicial to the interest of revenue. It is settle position as per legal precedents that to initiate proceedings under section 263, both conditions i.e. order is erroneous and also it should be prejudicial to interest of revenue. Therefore, in the given case, even the information submitted by the assessee are not found place in the assessment order, Ld. PCIT has called for the information under notice u/s 263. Ld. AR submitted that all the informations were once again submitted before Ld. PCIT. However, Ld. DR denied that assessee has not filed any information.
We do not agree with the conclusion of the Ld. PCIT that he had concluded that the order was erroneous, but has not made further investigation to determine, whether the order passed by AO is prejudicial to the interest of revenue. Instead, he remitted this issue back to AO to verify and investigate the issue once again and finalize the assessment order. As discussed above, Ld. PCIT should have verified or investigated the issue afresh by asking the assessee to submit all relevant information. We also notice that assessee claims the payments were made to doctors on regular consultancy fees and not relating to freebees. It is the duty of Ld. PCIT to establish that these payments were in fact freebees and not regular consultation fees, without actually finding that these are freebees and payments are in violation of conditions specified in Circular No. 5 of 2012, he proceeded to annul the assessment order.
In our view, the issue involved in this appeal is, whether payments are consultancy fees or freebees. AO has proceeded with the view that there are regular consultancy fees and accepted the submissions of assessee. AO did not discuss anything in his order. The department taking clue from audit query, they are presuming that the payments are relating to freebees. There is no evidence brought on record by the revenue authorities to substantiate that there were actually freebees. Mere presumption without any cogent material to indicate that these payments are actually freebees is far fetched.
Therefore, in our view, Ld. PCIT has not determined the other condition how it is prejudicial to the interest of revenue. As discussed above, the payments were made to doctors, is it freebees or not is the issue. If it is freebees, it is the duty of Ld. PCIT to bring on record that these payments are in fact disallowable under section 37 of the Act.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
