2023 (11) TMI 937 - ITAT INDORE

Revision u/s 263 - AO has completed the assessment take up through CASS for limited scrutiny - CIT held that AO has not properly made verification of identity and genuineness of the unsecured loans taken by the assessee - HELD THAT:- As decided in Naga Dhunseri Group Ltd. [2023 (5) TMI 418 - CALCUTTA HIGH COURT] instruction issued by CBDT to explain the manner in which limited scrutiny to be completed by the AO and therefore, once the AO has completed the assessment take up through CASS for limited scrutiny then the Pr. CIT cannot make a roving inquiry in guise of a limited scrutiny and as such instruction issued by the CBDT is binding on the department.

When the issue of examination of the identity, creditworthiness of the creditors and genuineness of the transactions was not subject matter of the limited scrutiny then the order of the AO cannot be held as erroneous so far as prejudicial to the interest of revenue on the ground that lack of inquiry. Accordingly we hold that the impugned order of Pr. CIT passed u/s 263 is invalid for want of jurisdiction.

CIT justification passing the impugned order and remanding the matter back to the AO for fresh order to establish the identity and creditworthiness of the creditor as well as genuineness of the transaction - From the balance sheet of M/s Nikita Multi Trade Pvt. Ltd. it is manifest that the said company was having sufficient funds in the reserves and surplus of more than Rs. 50 crore to lend the money of Rs. 3.8 crores to the assessee. The transactions of the loan is duly reflected in the bank account of the assessee as well as bank account of M/s. Nikita Multi Trade Pvt. Ltd. which shows that there was no prior deposit of any cash in the bank account of the said lender company. Therefore, there is nothing on record to doubt the genuineness of the transactions. All these records were before the Pr. CIT as it is clear from the impugned order that the Pr. CIT has referred to the trading account of the lender company wherein the said company has claimed depreciation which was disallowed by the AO. It is pertinent to note that the disallowance of depreciation by the AO in the scrutiny assessment of the lender company would not epso facto lead to the conclusion that the transactions of loan between the lender company and assessee is not genuine.

CIT has not even verified the balance sheet and bank account statement of the lender company to come to prima facie conclusion that the transactions are not genuine. Once the relevant evidences produced by the assessee discharge its onus to prove the identity and creditworthiness of the creditor as well as genuineness of the transactions then in absence of any contrary fact or material brought on record the acceptance of the said transactions by the AO is a plausible view based on the documentary evidence. Once the AO has taken a plausible and possible view which is not found to be contrary to the facts/record or to law then the Pr. CIT is not permitted to exercise the revisionary powers u/s 263 of the Act just to set aside the order of the AO for re-adjudication of the same.

Though the issue of verification of unsecured loan was not subject matter of limited scrutiny however, it is evident from the show cause notice issued u/s 142(1) that the AO has raised queries about this issue which was duly replied by the assessee with supporting evidence and therefore, it is not a case of complete lack of inquiry on the part of the AO. In fact the AO has conducted an inquiry and verified the relevant details and material produced by the assessee in support of the transactions of unsecured loan. Thus the Pr. CIT while passing the order u/s 263 cannot remand the matter back to the AO for passing the fresh order as it will lead to the conclusion that the Pr. CIT himself was not sure about the correctness of the claim of the assessee which was accepted by the AO. Even otherwise when the assessment order passed by the AO cannot be held as erroneous for want of inquiry then it is essential on the part of the Pr. CIT to give conclusive finding that order passed by the AO is not sustainable either it is contrary to the facts or to the law.

Accordingly the impugned order passed by the Pr. CIT without giving finding to the effect that the claim of the assessee is not acceptable due to failure of the assessee failed to prove the identity and creditworthiness of the creditor as well as genuineness of the transactions is not sustainable and liable to be quashed. Decided in favour of assessee.