TMI Blog2020 (3) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... situation the amount that was reflected on such hundis cannot to be taken as income of the assessee. Therefore the incidence of tax would be on the unexplained cash deposited in the bank account of the assessee. In this case the amount surrendered by the assessee is higher than what it was found to be unexplained cash deposits in its bank account. Therefore there is no infirmity in the order giving set off of the maturity amount. It is however further clarified that we have not expressed our view regarding genuineness of hospital receipts being invested in hundis as surrendered by one of the partner of the assessee firm. Our finding is purely based on the material placed before us. Ld. PCIT has not brought any material suggesting that the amounts so surrendered by the partner of the firm is related to proceed of crime. AO failed to make enquiry in respect of year wise investment - No material is placed by the assessee regarding this issue. In our considered view when there is claim of investment being made out of unrecorded hospital receipts he ought to have made investigation regarding year wise investment. This observation of the Ld. Pr.CIT is sustained. CIT allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns issued u/s 263 are untenable, contrary to law unsustainable. 1.4 On the facts and in the circumstances of the case, the Ld. Commissioner has erred in treating the assessment order as erroneous and prejudicial to the interest of the Revenue on an issue which has been considered, examined and investigated upon during the assessment both by the assessing officer and also by the JCIT while giving his directions u/s 144A- 2.NO JUSTIFICATION EITHER IN LAW OR ON FACTS AND THE GROSS ILLGALITY DONE BY THE Ld. CIT IN SETTING ASIDE THE ORDER DATED 24/3/2015 PASSED BY THE JCIT U/S 144A. 2.1 That the Ld. CIT has simply set-aside the order dated 24/3/2015 passed u/s 144A by the JCIT without even pointing out any error in the said order. Since there was no error pointed out in the order u/s 144A therefore the same could not have been set-aside u/s263. 2.2 That the order passed u/s 144A was based on longstanding judicial matrix and the legal principle derived from an order of supreme court and thus without pointing out how the said order u/s 144A is erroneous the same could not have been revised u/s263. 3A NO ERROR IN THE ORDER OF THE AO IN ALLOWING TELESCOPING OF UNDIS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esearch Centre on 23.09.2011. During the course of survey undisclosed income amounting to ₹ 31,24,41,685/- was surrendered by the assessee through its partners under different heads. Out of the surrendered amount of ₹ 31,24,41,685/-, the amount of ₹ 23,61,18,930/- was surrendered in the hands of the assessee firm under various heads as details below: Sr. No. Name of the assessee Surrendered Amount (In Rs.) Heads 1 M/s Bhandari Hospital Research Centre (As per statement dated 24.09.11 of partner Shri Vinod Bhandari on account of Hundites 16,65,00,000/- On account of Hundies 2 M/s Bhandari Hospital Research Centre (As per statement dated 24.09.11 of partner shri Vinod Bhandari) 6,45,02,010/- On account of suppressed hospital receipts 3 M/s Bhandari Hospital Research Centre (As per statement dated 24.09.11 of partner shri Vinod Bhandari) 51,16,920/- O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24.09.11 of partner shri Vinod Bhandari- on account of bogus unsecured loans) 51,16,920/- 51,16,920/- 5. Thereafter the case was selected for scrutiny and assessment u/s 143(3) was completed on 24.03.2015 thereby the assessing officer assessed income at ₹ 1,02,63,070/- for the year under appeal. Subsequently, Ld. Pr. CIT after examining of records issued a show cause notice dated 15.01.2015 u/s 263 of the Act calling upon assessee as to why the assessment so framed should not be revised. The relevant contents of the notice dated 15.03.2017 which is reproduced by the Ld. Pr. CIT in his order are as under: 3.The relevant portion of the show cause notice u/s 263 is reproduced as under :- A. During the survey on 24.09.201 surrender of income was made as under :- (a) Cash reception per LP-02 6,45,02,010/-A (b) Unsecured Credit u/s 41(1) 51,16,920/- (c) Loans against Hundi 16,65,00,000/- Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue needs further examination. H. On perusal of assessment records, it seen that the returned income is for A.Y. 2012- 13 is 94,31,692/- whereas profit before tax before partners remuneration is as per P L account is ₹ 3,64,88,334/-. It may be noted that the above profit includes undisclosed income surrendered during the survey at ₹ 17,17,49,505/- deduction of ₹ 8 Cr. claimed u/s 35AC. The assessee included the undisclosed income surrendered under various heads totaling to ₹ 17,17,49,505 1- in the P L Account itself thereby creating misleading picture of increase in the net profit as compared to the last years. If the surrendered income as well as the deduction claimed u/s 35 AC are excluded the book results would show a net loss of ₹ 5,52,61,171 1- on the total receipts of 20,39,86,311/-. The picture for last 3 years emerging there from is as under :- A.Y. 2010-11 2011-12 2012-13 including income surrendered in survey 2012-13 excluding income surrendered in survey Total re (A) 7,26,93,557/- 10,58,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 68 respectively, there is net business loss amounting to ₹ 5,52,61,171/-- and hence, the assessee did not have any positive business income so as to claim deduction u/s 35AC at ₹ 8 Crores. The very transaction of giving ₹ 8 Crores uls 35AC to some Private Medical University which is the same line of business i.e. running a medical and dental college is highly doubtful transaction more so when the entire amount has been given after the date of survey. At the one hand assessee is incurring interest expenses running in to crores of rupees on various loans and running the hospital on loans taken from banks and various other persons including family members, giving away ₹ 8 crores on charity is beyond all human probabilities. It clearly seems to be ploy to reduce taxability on surrendered income. The issue needs examination from above angle. K. The Depreciation on PET CT SCAN at ₹ 1,61,00,262/- has been claimed at higher rate of 40% instead of 15% which has been allowed by the AO without any enquiry. L. the AO has allowed salary paid amounting to ₹ 4,75,90,791/- without verifying whether TDS as per provisions of the Income Tax was made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions. Ld. AR of the parties has argued at length. Submissions of the assessee 1. In para 1 of CIT s 263 order dated 30.3.2017 it has been stated : It is seen that the order passed by the Assessing officer is erroneous and prejudicial to the interest of revenue on account of failure of the assessing officer in making necessary enquiries and it being not as per provisions of the Act. Thus the twin reasons ascribed are : a) failure of the assessing officer in making necessary enquiries b) it being not as per provisions of the Act. A. Whether there is failure on the part of the AO in making necessary enquiries : i. AO issued summons u/s 131 dated 23/12/2013 (pg 82 83 of paper book) wherein categorically the AO has sought books of accounts, accounting of tax effect of survey operations in the books, any significant change in expenditure, affidavit in retraction of admission made during survey is an attempt of avoid incidence of taxation. ii. Reply in response to summons u/s 131 was filed by the assessee on 3.1.2014 (page 84-106 of paper book) and it was submitted that out of surrendered amount of ₹ 23,37,49,505 only an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled reply date 29/1/2015 in continuation to the earlier reply ( page 154- 155 of paper book) wherein hard copies of books of accounts and confirmations of loans and reconciliation of 26AS was filed. Total 109 pages were filed alongwith this reply. xii. On 29/1/2015 following order sheet query was raised by the AO : xiii) Reply was filed by the assessee on 3/2/2015 (pg 261- 264 of the paper book) wherein all the details were duly filed. The annexure to this reply (pg 265-266 of the paper book) showed hundi loans of R₹ 6,20,00,000 were made utilizing the unaccounted hospital receipts. Forms no. 58A issued under Rule 11-O of Income tax Rules issued by M/s Gitanjali University were placed on record (page 267- 272 of the paper book). These forms showed the manner of utilization of the Cumulative donations received by the university as well as the donation received from the assessee and the utilization as per the approval of National Committee u/s 35AC. The IT Return of M/s Gitanjali University for AY 2011-12 was placed (on page no. 273-282 of the paper book) with the audited final accounts. The PAN card of the said university (on page 282 of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT detailed submissions were filed showing justification for set-off of receipts of ₹ 6,21,32,585 against Hundi loans. Copies of ledger of 41 Hundi persons, interest earned ledger and copies of hundies were duly filed (page 573 to 660 of paper book). xx. During the course of filing reply on 19/3/2015 the details of FIR (page 553 reverse side) filed against Dr. Bhandari were duly explained to the AO. Copies of FIR filed against Dr. Bhandari was also filed (page 556-557 of paper book). xxi. The JCIT vide its order dated 24/3/2015 directed the AO to grant set-off of undisclosed receipts from hundli loans as the same is mandated by Supreme Court in 123 ITR 457(SC) and other decisions. In respect of deduction u/s 35AC the JCIT directed the AO to allow the deduction if the assessee follows the conditions as provided in the Income-tax Act. (page 17 to 20 of the Assessment Order) xxii. The AO passed the order u/s 143(3) following the directions of JCIT and the documents on record and allowed set-off of ₹ 62125115 from the hundi loans and also allowed deduction u/s 35AC of ₹ 8 crore. xxiii. In these circumstances the order passed u/s 143(3) was after du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had on his record the entire copy of balance sheet and profit and loss account with schedules and notes thereon. The AO had made detailed examination of books of accounts and had done a comparative analysis of three years. Further in response to the AO s summons u/s 131 the Assessee had submitted on 3/1/2014 , (copy enclosed as page no 86-90 of paper book) comparative figures of A.Y. 2012-13 of each expense head forming part of Direct expenses and finance /interest expense and other expenses as compared to expenses under the same heads in previous 2 years. Detailed notes on variations were explained. The AO after such a detailed examination found the matter of variation of business profit as percentage of business receipts for the A.Y.2012-13 as satisfactorily explained. There is one more element to this. The CIT while computing the ratios taken out the total receipts the surrendered Hospital receipts of ₹ 6.21 crores surrendered as current year income during survey. This Income was acknowledged on the basis of documents seized as business Income / receipts for the current year and should have been added to the Hospital receipts for computing the ratios. If this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e photon emission computed tomography) imaging, as used in nuclear cardiac stress testing, is performed using gamma cameras. Usually one, two or three detectors or heads, are slowly rotated around the patient's torso. Multi-headed gamma cameras can also be used for Positron emission tomography (PET) scanning, provided that their hardware and software can be configured to detect coincidences (near simultaneous events on 2 different heads). Gamma camera PET is markedly inferior to PET imaging with a purpose designed PET scanner, as the scintillator crystal has poor sensitivity for the highenergy annihilation photons, and the detector area is significantly smaller. However, given the low cost of a gamma camera and its additional flexibility compared to a dedicated PET scanner, this technique is useful where the expense and resource implications of a PET scanner cannot be justified. Further please refer Reference Held ACIT vs. Bharat Scans P Ltd. (2014) 39 CCH 0272 ChenTrib (2014) 31 ITR (Trib) 0103 (Chennai), (2014) 65 SOT 0138 (Chennai) ((URO) Held, nature and use of PET/CT scan sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust, 166 ITR 580 (M.P) k. Hari Iron Trading Co. v/s CIT, 263 ITR 437 (P H) l. CIT v/s HARI Singh Associates, 267 CTR 442 (Raj.) m. 335 ITR 83, CIT vs. Anil Kumar Sharma (Delhi), m. 341 ITR 537 (Delhi), CIT vs. Vikas Polymers o. 343 ITR 342, CIT vs. Hero Auto Ltd. (Delhi H.C.), p. 111 ITR 326, J.P. Srivastava Sons Vs. CIT, (Allhd. H.C) q. 320 ITR 674, CIT vs. Ashish Rajpal (Delhi H.C.). At r. 323 ITR 632, CIT vs. Design and Automation Engineers (Bombay) P. Ltd. (Bombay H.C.), of s. 323 ITR 206, CIT vs. Development Credit Bank Ltd. t. 243 ITR 83, Malabar Industrial Co. Ltd. Vs. CIT, (Supreme Court) u. 203 ITR 108 CIT Vs. Gabriel India Ltd., (Bombay H.C.) Elaborating on the aforesaid decisions : 4.1 On the question regarding examination of validity of issuance of notice, assumption of jurisdiction and passing of impugned order u/s 263 of the Act, the appellant is placing reliance on the decision of Hon ble Supreme Court in the case of Malabar Industries Co. Vs. CIT (243 ITR 83) and submits that as per 263 of the Act it is clear that the pre requisite to exercise of jurisdiction by the Commissioner is that the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f and deduction to the assessee, the Ld. CIT was not correct in holding that the AO passed assessment order without making proper enquiry and without application of mind and the same was erroneous and prejudicial to the interest of the Revenue. 4.4. Placing reliance on the decision of Hon ble Gauhati High Court in the case of Bongaigaon Refinery and Petro Chemicals Ltd. vs. Union of India (287 ITR 120), the appellant submits that the error in the order of the Assessing Officer and resultant prejudice to the interest of Revenue are twin factors to coexist for conferring authority on the commissioner to invoke powers u/s 263 of the Act. Merely entertaining a different view from the one adopted by the AO, which is plausible and reasonable, would not clothe the Commissioner with power to revise or interfere u/s 263 of the Act. Further, placing reliance on the decision of Hon ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. (203 ITR 108), the appellant submits that if the AO, while framing assessment in accordance with law, makes certain assessment, then the same cannot be branded as erroneous unless it is not in accordance with law, by the Commissioner simply b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices. The assessee submitted various relevant documents. It is also pertinent to mention that the AO adjudicated the issue of queries and replies in regard to said claim by passing a detailed order. Further the note sheet entries clearly shows the deliberations between the AO and the assessee company on all the issues and adjudication by the AO which was further guided by order u/s 144A. Thus by no stretch of imagination this can be termed as a case of lack of inquiry or even inadequate inquiry. 4.8 In the case of CIT vs. Gabriel India Ltd. (203 ITR 108), the Hon ble Bombay High Court has held that the power u/s 263 (1) of the Act is in the nature of supervisory jurisdiction and can be exercised only if the circumstances must exist to enable the Commissioner to exercise power of revision subsection (1) of section 263 of the Act viz. (i) the order should be erroneous; and (ii) by virtue of the order being erroneous and prejudicial to the interest of the revenue. Speaking for Hon ble Bombay High Court, their Lordships held that an order cannot be termed as erroneous unless it is not in accordance with law and if the AO, acting in accordance with law makes certain assessment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts, in the opinion of this court, were material, and had been given weightage by the Tribunal in its impugned order. There is no dispute that the investment to the sister concern, was not questioned; even the Commissioner has not sought to undermine this aspect. Equally, there is no material to say that apart from that single dividend warrant, any other dividend income was received. Furthermore, there is nothing on record to say that the assessee had to expend effort, or specially allocate resources to keep track of its investments, especially dividend yielding ones. In these circumstances, it can be said that whether the deduction under section 14A was warranted, was a debatable fact. In any event, even if it were not debatable, the error by the Assessing Officer is not unsustainable . Possibly he could have taken another view; yet, that he did not do so, would not render his opinion an unsustainable one, warranting exercise of section 263. 4.11. The appellant is also placing reliance on the decision of Hon ble Gujarat High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Globus Infocom Ltd. vs. CIT (369 ITR 14) wherein it was held thus : Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase prejudicial to the interest of 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 interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. 4.14 The appellant also relies on the judgment of Rajasthan High Court in the case of CIT Vs. Deepak Real State Developers (I) P. Ltd. (2014) 367 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue with a conclusion in one way or the other and has left it midway, which covers this case in favour of the assessee by the judgment of Hon ble Delhi High Court in the case of Globus Infocum Ltd. vs. CIT (369 ITR 14). In view of the facts of the case and the relevant provisions of the Act, this Hon ble Tribunal be pleased to hold that the assumption of Jurisdiction to issue notice to the assessee u/s 263 of the Act (supra) and to set aside the assessment order and in setting aside the order u/s 144A, by passing the impugned order u/s 263 of the Act was not valid and the same was void ab initio. Hence, the notice issued by the Ld. CIT u/s 263 of the Act, impugned order without any conclusive findings, setting aside and revising the assessment order to be reframed de novo and setting aside the order u/s 144A and all subsequent proceedings conducted and orders, if any, passed in pursuance thereto deserve to be quashed. Case Laws: In the Case of Cadila Pharmaceuticals Ltd v Pr CIT. Ahmedabad Hon'ble Tribunal Ahemedabad Bench held that: Para 4.1. In the light of aforementioned judicial pronouncement, it can be inferred that the assessment order is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO, a detailed reply was submitted and the AO on the basis of reply treated as the 'interest income' as 'business income' as has been done in earlier years. This fact is borne out of the records that the reply was submitted by the assessee- company submitting therein the details of loans and advances and interest income received from such loans and advances treated as business income of the company. The CIT has not applied his mind on the submissions made by the assessee-company. The Hon'ble Apex Court in the case of CIT vs. M/s.Excel Industries Ltd. has followed the decision of the Privy Counsel reported at 1926 AC 155 (PC in the case of Hoystead vs. Commissioner of Taxation, wherein it was held as under:- Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the order passed is erroneous or not . Similar view has been expressed by the Hon'ble Delhi High Court in a recent decision rendered in the case of Director of Income-tax vs. Jyoti Foundation reported at (2013) 357 ITR 388 (Delhi). The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (200) 243 ITR 83 (SC) has held that the CIT has to be satisfied of twin conditions, namely, (i) the order of the AO 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 s. 263(1). In the present case, the Revenue has failed to demonstrate that these two conditions are ITA No.853/Ahd/2013 Madhusudan Industries Ltd. vs. CIT-II Asst.Year - 2008-09 satisfied. Therefore, in our considered view, there was no occasion to invoke the provisions of section 263 of the Act. The Ld.CIT is not justified in exercising revisonary jurisdiction under the facts and circumstances of the present case. The case laws relied upon by the Revenue would not apply on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax to pass an order under Section 263 of the Act. It was contended that all the details were furnished and the relevant documents were produced by the assessee at the time of assessment, that the books of account were also produced and that the Income tax Officer had passed the order of assessment after proper enquiry and after application of his mind. The Commissioner of Income tax, after taking into consideration the explanation of the assessee, held that the Income-tax Officer had framed the assessment in a hurry, without any proper enquiry and as such it was prejudicial to the interests of the Revenue. The Commissioner of Income-tax, therefore, set aside the order passed by the Income-tax Officer and directed the Income-tax Officer to make a fresh assessment according to law. Aggrieved by the order passed by the Commissioner of Income-tax, the assessee preferred an appeal before the Tribunal. The Tribunal held that the Commissioner of Income-tax, in his order, had failed to specify as to how the order passed by the Income-tax Officer could be held to be prejudicial to the interests of the Revenue. The Tribunal further held that the proceedings under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative and in favour of the assessee. It is well settled that where the ITO made the assessment in under hurry, accepting what the assessee stated in the return without making any enquiries in the circumstances of the case, the Commissioner would be justified in holding the order of the ITO to the erroneous. In the instant case, however, the Tribunal has found that the assessee had furnished all the requisite information and that the ITO considering all the facts and completed the assessment. The Tribunal further held that in the circumstances of the case, it could not be held that the ITO had made assessment without making proper enquiries. In view of these finding, the Tribunal in our opinion, was justified in law in reversing the order passed by the Commissioner. In the case of Commissioner of Income Tax vs. Mehrotra Brothers (2004) 270 ITR 157 (MP) Hon'ble Jurisdictional High Court held that Para We have considered the citations relied on by both the parties and concluded that when the assessee has furnished requisite information and the Income-tax Officer has. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to arrive at a definite conclusion but he had not done so. In the case of Income Tax Officer v. D.G. Housing Projects ltd. (2012) 343 ITR 329 (Delhi) Hon'ble Court held that . In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that order passed by the Assessing Officer may be erroneous . The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondents computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is erroneous . The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpreted by the High Courts makes it clear that the Ld Pr. CIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous, the Ld Pr. CIT should have shown that the view taken by the AO is unsustainable in law. In the instant case, the Ld Pr. CIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the Ld Pr. CIT is not in accordance with the mandate of the provisions of sec. 263 of the Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. Even though there is a doubt as to whether the said explanation, which was inserted by Finance Act 2015 w.e.f. 1.4.2015, would be applicable to the year under consideration, yet we are of the view that the said Explanation cannot be said to have over ridden the law interpreted by Hon ble Delhi High Court, referred above. If that be the case, then the Ld Pr. CIT can find fault with each and every assessment order, without conducting any enquiry or verificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue The assessment, in this case was completed U/S 143(3) of LT. Act 1961, on 24/03/2015 and the direction of JCIT U/S l44A of IT Act are also dated 24.03.2015. The CIT-I, Indore, on perusal of record had considered the assessment so passed by A.O. as erroneous and prejudicial to the interest of revenue as the A.O. has failed to carry out necessary and required inquiries. The basis on which the assessment has been found erroneous and prejudicial to the interest of revenue. (l) In a survey conducted by the department under section 133 A of IT Act, 1961, the appellant had made disclosure of ₹ 23.61 which was reduced to 17.40 crores as per affidavit filed on 19.01.2012 which is filed after 4 months of survey date. This revision was allowed without conducting proper inquires and without application of mind. (2) The deduction claimed u/s 35AC of IT Act was accepted without conducting required inquiries as can be seen from the assessment order. (3) The A.O. has failed to appreciate and examine the fact that one of the partner, Sh. Vinod Bhandari, has been main accused in Vyapam scam and there are allegation of earning of crores of rupees in the scam. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndated upon the A.O. before the assessment is finalized and claims of appellants are admitted. The assessment order has to contain clearly the findings of inquiries. A number of decisions of Hon'ble Apex Court, High Court, and Tribunals have been relied upon and the copies of decisions have been filed with the Hon'ble bench, which support the view of the department that lack of inquiry, inadequate inquiry, admission of claim without supporting material and no discussion in the assessment order are sufficient and good reasons for invoking section 263 of IT Act 1961 by the CIT. The list of cases along with the gist of decisions replied upon are hereby filed. S. No Reported CASE LAW 1 Malabar Industrial Co. Ltd. Vis Commissioner of Income Tax 243 ITR 83 (SC) 2. Smt. Taradevi Aggrawal Vis Commissioner of Income Tax 88 ITR 323 (SC) 3 Rampyaridevi Saraogi Vis Commissioner of Income Tax 67 ITR 84 (SC) 4 Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3556 of 1984 (SC) 6 Rajmandir Estates Pvt. Ltd. vs PCIT -III GA No 509 of2016 (HC) Kalkata 7 (1) P.G. Infrastructure Service Pvt. Ltd. (2) S.N. Vijaywargiya (3) People's International Service P. Ltd. Bhopal ITA No 607 to 609 (Indore) 8 M/s Crompton Greaves Vis CIT -6 Mumbai IT AT C Bench Mumbai Note: The case laws at serial no. 5 and 8 have been relied upon for invoking exception/exemption and retrospective application of Explanation 2 to section 263 of IT Act 1961. 3. In the case of Malabar Industrial Co. Ltd., Hon'ble Supreme Court (243 ITR 83- SC) held that where A.O. had accepted the entry in the statement of account in the absence of supporting material, without making any inquiry, the exercise of jurisdiction by CIT under section 263(1) was justified. In this case the damages received by the appellate in lieu of agriculture income was wrongly allowed by the A.O. as agricultural income when the same was finally treated as income from other source. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional expenses claimed in the revised ROI were withdrawn despite issue of notice U/S 69C of Income Tax Act. It was contended on behalf of Mr. Bachan that the A.O. had taken the possible view and CIT was not supposed to substitute his view particularly in view of the facts that the additional expenses claimed through revised ROI were withdrawn. It was held by the Hon'ble/ Apex Court that making claim and subsequently withdrawing the same gives rise to necessity of further inquiry. In the instant case under consideration, the A.O. has omitted to take note of vital facts like abnormal increase in sell price of land, agriculture activity, agricultural Income, nature of business and legality of maintaining two portfolios and allowed the exemption claimed by the appellant without application of mind. The gist of decision of Hon'ble Supreme court in the case of Shri Amitabh Bachan is as under:- There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Commissioner was a detailed order. There was no doubt that he did mention some facts which were not indicated or communicated to the assessee and which the assessee had had no opportunity of meeting. The High Court was right in holding that all this material was supporting material and did not constitute the basis grounds on which the orders under section 33B were passed by the Commissioner. There was ample material to show that the ITO made the assessments in undue hurry. The assessee was a new assessee and filed voluntary returns in respect of a number of years, i.e..from assessment years 1952-53 to 1960-61. The return for the assessment year 1953-54 was undated. The returns for the assessment years 1952-53 and 1957-58 was dated 21.03.1961 , and those for the assessment years 1958-59 to 1960-61, were dated 26.04.1961. On 21.03.1961, the assessee made a declaration giving the facts regarding initial capital, the ornaments and presents received at the time of marriage, other gifts received from her father-in-law, etc., which should have any ITO on his guard. But the ITO without making any enquiries to satisfy himself passed the assessment order on30.03.1961, for asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, it appears that the Income-tax Officer has not examined the matter in the light of the conditions laid down for grant of relief under sections 80HH and 8 OJ. Certain conditions have been laid down in both the sections and the Income-tax Officer should have examined the assessee on-the basis of the conditions and thereafter recorded the finding whether they are entitled to the benefit of section 80HH or 80J. But, instead of this, the Income-tax Officer only proceeded to assess the liability of the assessee and that was not the correct approach. The Income-tax Officer should have examined the matter in the light of the conditions mentioned in both the sections before granting relief. We are of the opinion that the Commissioner of Income-tax has not given any finding, but only remanded the case back to the Income-tax Officer for reassessment after complying with the conditions laid down for grant of benefit under sections 80HH and 80J. Therefore, the finding recorded by the Tribunal appears to be not correct because all the materials which ought to have been utilised by the Income tax Officer were not there and it is not understandable that how the Tribunal have on. their own, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous and prejudicial to the interests of the Revenue and after setting aside the assessment order, remanded the matter to the Assessing Officer for fresh assessment on the merits. The Commissioner of Income-tax also directed the Assessing Officer to observe rules of natural justice and to provide opportunity of hearing to the assessee before making fresh assessment order on the merits. This adequately safeguards the interest of the assessee and would cause no prejudice. It seems that the Income-tax Appellate Tribunal was carried away by the first part of the order of the Commissioner of Income-tax as a result the later part of the order escaped from the notice of the Tribunal and the Income-tax Appellate Tribunal branded the order of the Commissioner of Income-tax as based upon probabilities, surmises and conjectures. 8. In a recent decision, in the case of Rajmandir Estate Pvt. Ltd., Hon'ble Kolkata High Court, (GA No. 509 of 2016 with ITAT No. 113 of 2016) had upheld the order of CIT passed u/s 263 of Income tax Act. In this case, the AO had passed the assessment order u/s 143(3) read with section 148 of income tax Act 1961. There was a huge increase in share capital b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited in the books in Section 68indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine as was held in the case of CIT -Vs- Nova Promoters and Finlease (P) Ltd. (supra). Similar views were expressed by this Court in the case of CIT - Vs- Precision Finance Pvt. Ltd. (supra). We need not decide in this case as to whether the proviso to Section 68of the Income Tax Act is retrospective in nature. To that extent the question is kept open. We may however point out that the Special Bench of Delhi High Court in the case of Sophia Finance Ltd. (supra) held that the ITO may even be justified in trying to ascertain the source of depositor . Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct.. We find no substance in the submission that the exercise of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of mind. It was held as under:- Having heard the learned counsel for the revenue, we find that in the assessment order, there is no discussion regarding the question as to whether the amount of income shown by the assessee which is being claimed to be exempt has actually been earned by him or not and, further, whether the entire amount of income from Agriculture and Poultry farming is exempt from tax. The Commissioner of Income-tax has rightly initiated proceedings under section 263 of the Act as exemption has been granted without any application of mind. The Apex Court in the case of Malabar Indus trial Co. Ltd. (supra) while interpreting section 263 of the Act held as follows i=- A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer 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-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y inquiry pertaining to the claim of expenses submitted by the assessee in its books and statements of accounts submitted along with return and this is a clear case of lack of inquiry . We may also point out that if the AO fails to conduct the said investigation, he commits the error and the word erroneous includes failure to make inquiry. In such cases, the order becomes erroneous because necessary inquiry or verification has not been made and not because a wrong order has been passed on merits. We further hold that if from the detailed investigation conducted by ITA No. 1641 to 1646IDell2014 AY: 2006-07 to 2010-11 the Investigation Wing of the department, it is revealed that the bogus expenses have been claimed by the assessee with the intention to reduce its tax liability, then the order is also prejudicial to the interest of revenue. The argument of the ld. Counsel of the assessee about revenue neutrality is not applicable to the facts an circumstances of the present case. In the case of ITO vs Ch. Atchaiah (1996) 218ITR 239(SC), speaking for Hon'ble Apex Court their lordships held as followst- In our opinion, the contention urged by Dr. Gauri Shankar merits accepta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of A.O. was upheld. In this case, the appellant issued fresh share capital of 14.72 Lakhs at a premium of 7.21 crores. The A.O. obtained all the required documents and issued notices to 8 subscribes out of 21 u/s 133(6) of IT Act 1961 and on the basis of details filed and confirmations received from subscribers, the A.O. proceeded to accept the explanation of assessee and completed the assessment with nominal addition of ₹ 28,049/-. The CIT invoked the section 263 of IT Act 1961 and set aside the order for the reasons that proper enquiry was not carried out by the A.O. and directed the A.O. to make fresh assessment after conducting independent, detailed and complete inquiries of subscription and share premium. The Hon'ble IT AT confirmed the decision of CIT with the observation that inadequate inquiry falls in the category of No inquiry which results in to making the order us erroneous and prejudicial to the interest of revenue. The relevant part of decision is as under:- Whether the enquiry conducted by the Assessing Officer in such cases can be as a proper enquiry? Though the Assessing Officer issued notices under section133(6) but it failed to comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of such a premium was justified and whether the parameters of section 68 stood complied with. In the instant case, the Assessing Officer merely issued notices under section 133(6) to some of the shareholders whose replies, indicating that they overtly purchased the shares at ₹ 200 each, were kept on record. Putting a lid at the matter at that stage only, the Assessing Officer did not consider it prudent to examine such shareholders as to their capacity and genuineness of the transactions. Confronted with such peculiar and hair-raising circumstances, the Assessing Officer should have got alerted and dug the matter deep for unearthing the reality of the transaction. Unfortunately, nothing of this sort was done by him. It is a perfect citation for a complete nonapplication of mind by the Assessing Officer and of passing the assessment order in undue haste. [Para 17.h.J Thus, there can be no escape from an axiomatic conclusion that in all these cases the enquiry conducted by the Assessing Officer's is exceedingly inadequate and hence fall in the category of 'no enquiry' conducted by the Assessing Officer, what to talk of charactering it as an 'inadequate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... positively conclude as to conducting or nonconducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just ordinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, the obtaining of the documents and the application of 'kind thereon, without a further outside enquiry, may mean that the Assessing Officer did conduct enquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it, then a mere collection of documents cannot be held as conducting enquiry, leave aside, adequate or inadequate. In such later cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a particular transaction cry hoarse about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, which is relevant only up to the completion of assessment; iii) Inadequate inquiry conducted by the AO in the given circumstances is' as good as no enquiry and as such the CIT was empowered to revise the assessment order; ivy The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to positively indicate the deficiencies in the assessment order on merits on the question of issue of share capital at a huge premium; v) the AO in the given circumstances can't be said to have taken a possible view as the revision is sought to be done on the premise that the AO did not make enquiry thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue on that score itself. 12. In a recent decision of D. Bench of Kalkata IT AT in the case of Jubilee Commitrade (P) Ltd. Kalkata (ITA TO 1179fKaU2016), The Hon'ble bench has confirmed the order of CIT setting aside the order of A.O. In this case, the Hon'ble Bench has relied upon the order of B- Bench of Kalkata IT AT in the case of Subhlakshmi Vanijya (P) Ltd. The CIT had invoked the section 263 of IT Act-1961 for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted by the Assessing Officer. Therefore, These decision are applicable on the present case also. This Hon'ble bench has also placed reliance on almost all the case laws relied upon by us in this case. The operative part of order of this Hon'ble bench is reproduced here under:- We have carefully heard the rival contentions of the parties. We find that in similar type of cases in ITA Nos. 467/Ind12016, 27/Ind12016, 341/Indl2016 etc. etc. this Bench of the Tribunal vide its order dated 14th July, 2016 has held as under :- 5. After hearing both the parties and perusing the material available on record and keeping in view the peculiar facts and circumstances of these cases, we are of the considered view that in short time from 29.03.2014 to 30.03.2014, it was practically impossible for the Assessing Officer to have examined the returns of the assessee vis-avis the details and particulars filed in support of the returns and form an opinion and frame a detailed assessment order on the issues in the returns of income. Therefore, we have no hesitation in accepting the arguments of the ld. Departmental Representative and upholding the present orders passed u/s 263 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully following the above judgment of the Hon'ble jurisdictional High Court, these appeals of the assessee are dismissed. 14. Reliance if also placed hereby on Explanation-2 to section 263 of IT Act 1961 inserted by finance Act 2015 w.e.f. 01.06.2015 considering the same as having retrospective effect. It is a settled rule of construction that every statue is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. Ordinarily the court are required to gather the intention of the legislature from the overt language of the provision as to whether it has been made prospective or retrospective, and if retrospective, then from which date. However, some times what happens is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation if subsequently some amendment is carried out to clarify the real intent, such amendment has to be considered as retrospective from the date when the earlier provision was made effective. Such clarificatory or explanatory amendment is declaratory. As the later amendment clarifies the real intent and declares the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this sub-section,- (a) an order passed [on or before or after the 1st day of June, 1988J by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner 2 [or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (U) an order made by the [Joint} Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; (b) record [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988J, the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. It is profitable at this stage to refer to the Memorandum to Finance Bill 2015 and notes to clauses to Finance Bill, 2015 which are as under: Further, it is essential to refer to the memorandum to finance bill 2015 and notes to clause so as to understand the real intention of the legislature in inserting Explanation 2 to section 263 of IT Act 1961 which is reproduced here under for ready reference: MEMORANDUM TO FINANCE BILL 2015 The existing provisions contained in sub-section (1) of section 263 of the Income tax Act provides that if the Principal Commissioner or Commissioner considers that any order passed by the assessing officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment will take effect from 1st June, 2015. The plain reading of existing provisions of section 263 of IT Act 1961, the memorandum to finance bill 2015 and notes on clauses of finance bill 2015 as reproduced above makes it evident beyond doubt that said Explanation 2 to section 263 of IT Act 1961 was brought in just as clarificatory or explanatory to the original intent of section 263 of IT Act 1961. The intention of legislature has been to explain and clarify the originally enacted statue so as to declare the position as was originally intended. The language of the Explanation 2 starts as for the purpose of this section, it is here by declared that the order by which goes to prove that the relevant insertion of explanation has been declaratory. Therefore, taking support from decision of Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial Co. Limited(supra) whereby no enquiry/verification is made by the AD whatsoever with respect to claim of deduction of ₹ 17.72 crores with respect to the provisions for warranty, excise duty, sales tax and liquidated damages. Moreover, now Explanation 2 to Section 263 of the Act is inserted in the statute which is declaratory and claraficatory in nature to declare the law and provide clarity on the issue whereby if the A.D. failed to make any enquiry or necessary _ verification which should have been made, the order becomes erroneous in so far as it is prejudicial to the interest of revenue. A proviso added from 01-04-1988 to Section 43B of the Act from 01-04-1984 came up for consideration in Allied Motors Private Limited v. CIT (1997) 91 taxman 205(SC) before Hon'ble Supreme Court and it was given retrospective effect from the inception of the section on the reasoning that the proviso was added to remedy http://www.itatonline.org 18 ITA 1994Mum/13 ITA 28361Mum/14 unintended consequences and supply an obvious omission so that the section may be given a reasonable interpretation and that in fact the amendment to insert the proviso would not serve its object unless i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has crystallized during the year and which is wholly and exclusively incurred for the purpose of business of the assessee company, is allowed as deduction while computing income under the Act The A. D. was under duty to make necessary and proper enquiry, examination and verification's with respect to Provisions of ₹ 17.72 crores with respect to the claim of deduction of the assessee company for provisions for liquidity damages, warranty, sales tax and excise duty, while on perusal of the assessment orders u/s 143(3) of the Act dated 28.12.2010 and other documents filed before us, we have observed that the AD has not made any enquiry whatsoever with respect to the claim of deduction of expenses of ₹ 17.72 crores towards Provision for Warranty, Sales tax and excise duty and liquidated damages claimed by the assessee company while computing the income of the assessee company and the claim of the assessee company was accepted without any inquiry, examination or verification whatsoever by the AD and In the absence thereof of enquiry, examination and verification of the claim of the asssesee company for deduction of provisions for Warranty, Sales tax and excise duty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On account of suppressed hospital receipts 3 M/s Bhandari Hospital Research Centre (As per statement dated 24.09.11 of partner shri Vinod Bhandari) 51,16,920/- On account of bogus unsecured loans 3. Subsequently as per affidavit dated 23/0112012 the assessee has explained that the unaccounted receipts amounting to ₹ 6,21,25,115/- as per LPI 02 where utilized in making the hundi loans and remaining amount of hundi loans ₹ 10,43,74,8851- should be considered as unexplained. Assessee also stated that these are entries regarding discount allowed of ₹ 23,69,425/- and petty cash expenses of ₹ 7,470/- and therefore correct amount of unaccounted receipt is ₹ 6,21,25,115/-. Thus the surrendered income was revised to ₹ 17,16,16,920/-. It was also observed during assessment proceedings that the assessee has claimed deduction u/s 35AC amounting to ₹ 8 crore. The assessee. on 17.03.2015, has made request before the JCIT, Range- 3, Indore to issue directions u/s 144A. The Joint Commissioner Income Tax, Range-3, Indore has issued directions u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of survey was used for onward lending for loans given on hundi with date-wise receipts and payments. The assessee has simply stated that the unaccounted receipt of ₹ 6.45 crore was utilized in making the hundi loans without any basis or without any proper supporting documents and it is only an after thought of the assessee to reduce the tax burden and avoid paying taxes. These factors were not taken into consideration during assessment and further enquiries were not made which render the assessment order erroneous and prejudicial to the interest of the revenue. 7.Reduction of surrendered undisclosed hospital receipts to ₹ 6,21,25,115/-: The assessee claimed reduction from the surrendered undisclosed hospital receipts under two heads namely: 1.Discount allowed- ₹ 23,76,9851- 2.Petty cash expenses- ₹ 7,4701- The credits debits entries are recorded in trial balance impounded during survey proceedings in Page No. 96 of LPI-2 of the seized documents. The independent verification of the above two entries were not made during the assessment proceedings for the discount allowed and petty cash entry which render the order e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12 2 MAHENDRA KUMAR NARENDRA KUMAR 4500000 236342 03-09-11 03-03-12 3 VIJA Y CHANDRA CHOUHAN 5000000 262600 30-09-11 30-03-12 4 JITENDRA PATEL 2500000 112190 24-10-11 24-03-12 5 KlSHAN 5000000 224384 08-10-11 08-03-12 6 VlRENDRA KUMAR 5000000 300822 22-08-11 28-03-12 7 KAILASH CHOUDHARY 5000000 224384 05-10-11 05-03-12 8 PRAKASH SINGHAL 3000000 22932 28-09-11 28-09-11 9 AMIT AGRAWAL 5000000 22438 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAHENDRA KUMAR 4000000 90740 28-07-11 28-09-11 26 JAG MOHAN MALVIY A 2000000 89753 04-10-11 04-03-12 27 RAMNARAYAN GUPTA 2000000 89753 02-10-11 02-03-12 28 SUSHILA PARMAR 2500000 131300 02-09-11 02-03-12 29 RISHABH JAIN 4500000 236342 13-09-11 13-03-12 30 NEMICHAND JAIN 5000000 75205 18-09-11 18-10-11 31 RAMDA Y AL BANERIY A 4000000 90740 19-08-11 19-10-11 32 VINOD RAMNANI 2500000 37603 23-09-11 23-10-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion amounting to ₹ 8 crore U/S 35AC owing to donation made to M/s Geetanjali University Trust. The aspect that whether the unaccounted funds generated by the assessee can be utilised for claiming deduction U/S 35AC was not examined during the assessment proceedings. The issue of deduction u/s 35AC was allowed without proper verification of the source of the funds by simply accepting the assessee's reply since the recovery of Hundi Loans is itself under question and the source is not verifiable and the reply was accepted without proper investigation and external enquires. It is also to be noted that one of the partners was under probe in Vyapam case and the co-ordination with other investigation agencies was not done and whether the said amount represents unaccounted funds were not examined which render the order erroneous and prejudicial to the interests of the revenue. 10. Year-wise investments- The verification related to year wise accretion of the investment was not made in the assessment proceedings and detailed enquiries were not made regarding this issue and the investments made by the assessee were accepted without further verification l1.A.ngiography re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere transferred after the date of survey and the assessee is incurring interest expenditure and having loan liabilities but donating a huge amount on charity of₹ 8Cr. is nothing but a way of the assessee to avoid tax liability on surrendered income and hence the transaction of ₹ 8 Cr. needs deep verification to ascertain the genuineness and hence the order is erroneous and prejudicial to the interest of the revenue. 14.Depreciation on PET CT Scan The assessee during the year has claimed depreciation on PET CT Scan amounting to Rs.l,61,00,262/- for A.Y. 2012-13 at the rate of 40% but the allowable rate is 15% which is not verified during assessment regarding the nature of machine, uses and its eligible rate of depreciation. 15.TDS deduction on salary of ₹ 4,75,90,791/- The specific enquiry related to details of TDS deduction made by the assessee for salary payment of ₹ 4,75,90,791/- was not made by calling for employee list, salary paid month wise and the related TDS deductions which render the assessment order erroneous and prejudicial to the interest of the revenue. Hence, in view of the above, the order u/s 143(3) passed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 M/s Bhandari Hospital Research Centre (As per statement dated 24.09.11 of partner shri Vinod Bhandari) 51,16,920/- On account of bogus unsecured loans 3. Subsequently as per affidavit dated 23/0112012 the assessee has explained that the unaccounted receipts amounting to ₹ 6,21,25,115/- as per LPI 02 where utilized in making the hundi loans and remaining amount of hundi loans ₹ 10,43,74,8851- should be considered as unexplained. Assessee also stated that these are entries regarding discount allowed of ₹ 23,69,425/- and petty cash expenses of ₹ 7,470/- and therefore correct amount of unaccounted receipt is ₹ 6,21,25,115/-. Thus the surrendered income was revised to ₹ 17,16,16,920/-. It was also observed during assessment proceedings that the assessee has claimed deduction u/s 35AC amounting to ₹ 8 crore. The assessee. on 17.03.2015, has made request before the JCIT, Range- 3, Indore to issue directions u/s 144A. The Joint Commissioner Income Tax, Range-3, Indore has issued directions u/s 144A vide order dated 24.03.2015. In the light of directions given u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given on hundi with date-wise receipts and payments. The assessee has simply stated that the unaccounted receipt of ₹ 6.45 crore was utilized in making the hundi loans without any basis or without any proper supporting documents and it is only an after thought of the assessee to reduce the tax burden and avoid paying taxes. These factors were not taken into consideration during assessment and further enquiries were not made which render the assessment order erroneous and prejudicial to the interest of the revenue. 7.Reduction of surrendered undisclosed hospital receipts to ₹ 6,21,25,115/-: The assessee claimed reduction from the surrendered undisclosed hospital receipts under two heads namely: 1. Discount allowed- ₹ 23,76,985/- 2. Petty cash expenses- ₹ 7,470/- The credits debits entries are recorded in trial balance impounded during survey proceedings in Page No. 96 of LPI-2 of the seized documents. The independent verification of the above two entries were not made during the assessment proceedings for the discount allowed and petty cash entry which render the order erroneous and prejudicial to the interest of revenue. 8.En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RENDRA KUMAR 4500000 236342 03-09-11 03-03-12 3 VIJA Y CHANDRA CHOUHAN 5000000 262600 30-09-11 30-03-12 4 JITENDRA PATEL 2500000 112190 24-10-11 24-03-12 5 KlSHAN 5000000 224384 08-10-11 08-03-12 6 VlRENDRA KUMAR 5000000 300822 22-08-11 28-03-12 7 KAILASH CHOUDHARY 5000000 224384 05-10-11 05-03-12 8 PRAKASH SINGHAL 3000000 22932 28-09-11 28-09-11 9 AMIT AGRAWAL 5000000 224384 03-10-11 03-03-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -07-11 28-09-11 26 JAG MOHAN MALVIY A 2000000 89753 04-10-11 04-03-12 27 RAMNARAYAN GUPTA 2000000 89753 02-10-11 02-03-12 28 SUSHILA PARMAR 2500000 131300 02-09-11 02-03-12 29 RISHABH JAIN 4500000 236342 13-09-11 13-03-12 30 NEMICHAND JAIN 5000000 75205 18-09-11 18-10-11 31 RAMDAYAL BANERIYA 4000000 90740 19-08-11 19-10-11 32 VINOD RAMNANI 2500000 37603 23-09-11 23-10-11 33 RAM MANOHAR MORYA 6000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iversity Trust. The aspect that whether the unaccounted funds generated by the assessee can be utilised for claiming deduction U/S 35AC was not examined during the assessment proceedings. The issue of deduction u/s 35AC was allowed without proper verification of the source of the funds by simply accepting the assessee's reply since the recovery of Hundi Loans is itself under question and the source is not verifiable and the reply was accepted without proper investigation and external enquires. It is also to be noted that one of the partners was under probe in Vyapam case and the co-ordination with other investigation agencies was not done and whether the said amount represents unaccounted funds were not examined which render the order erroneous and prejudicial to the interests of the revenue. 10. Year-wise investments- The verification related to year wise accretion of the investment was not made in the assessment proceedings and detailed enquiries were not made regarding this issue and the investments made by the assesssee were accepted without further verification l1.A.ngiography receipts of Rs.l,96,900/- An amount of Rs.l,96,900/- recorded III page no. 8 of LP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure and having loan liabilities but donating a huge amount on charity of₹ 8 Cr. is nothing but a way of the assessee to avoid tax liability on surrendered income and hence the transaction of ₹ 8 Cr. needs deep verification to ascertain the genuineness and hence the order is erroneous and prejudicial to the interest of the revenue. 14.Depreciation on PET CT Scan The assessee during the year has claimed depreciation on PET CT Scan amounting to Rs.l,61,00,262/- for A.Y. 2012-13 at the rate of 40% but the allowable rate is 15% which is not verified during assessment regarding the nature of machine, uses and its eligible rate of depreciation. L5.TDS deduction on salary of ₹ 4,75,90,791/- The specific enquiry related to details of TDS deduction made by the assessee for salary payment of ₹ 4,75,90,791/- was not made by calling for employee list, salary paid month wise and the related TDS deductions which render the assessment order erroneous and prejudicial to the interest of the revenue. Hence, in view of the above, the order u/s 143(3) passed by the assessing officer is erroneous since the enquiries required in the above discussed iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the above profit included undisclosed income surrendered during the survey at ₹ 17,17,49,505/- deduction of ₹ 8 Cr. claimed u/s 35AC. The assessee included the undisclosed income surrendered under various heads totaling to ₹ 17,17,49,505/- in the P L Account itself thereby creating misleading picture of increase in the net profit as comparative to the last years. If the surrendered income as well as the deduction claimed u/s 35 AC was excluded the book results would show a net loss of ₹ 5,52,61,171/- on the total receipts of ₹ 20,39,86,311/-. The Hundi loans standing as on the date of survey amounting to ₹ 16,66,32,585/- are in fact item of Balance sheet and the same represents assets of the assessee as on the date of survey and clearly reflects undisclosed income of the assessee in the form of unexplained investments. The assessing officer should have asked the assessee how these hundis were realized and formed part of income and expenditure account as business receipts against which many expenses have been claimed by including the same in the P L. A/c the assessee has created a distorted picture. If surrendered income is excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation on the facts of the present case. So far the question of giving donation to the Gitanjali Hospital and Research Centre is concerned Ld. CIT-DR candidly conceded to fact that the conclusion drawn by the assessing officer is based upon inquiry conducted through commission. Hence on this issue, we are of the view, that it cannot be inferred that no inquiry was made by the assessing officer and he accepted the contention without making due inquiries on this issue. Further the objection of Ld. Pr. CIT is that the income disclosed by the assessee cannot be treated to be business income as same would fall under the category deemed income and deduction of expenditure under Chapter-IV of the Act would not be available. However, we find that the Ld. JCIT was conscious of this fact while passing the order u/s 144A of the Act. It is pertinent to note that assessee has been claiming that he had certain unrecorded hospital receipts which he offered for taxation. There is no dispute with regard to the fact that inquiries were made regarding genuineness of transactions of donation to Gitanjali Hospital, Udaipur. Now the question whether deduction of such expenditure would be available to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Genesis of this issue is in the recovery of hundis at the premises of the assessee and statements of Dr. Vinod Bhandari one of the partners of the assessee firm recorded during the course of survey action. The relevant contents are reproduced herein for the sake of clarity: 17. The aforesaid statement was retracted vide letter dated 19.01.2012 by way of affidavit duly notarized the relevant contents as reproduced herein below. 11. In reply to Q.11 of the said statement, I had offered a sum of ₹ 6,45,02,010/- as unaccounted receipt of the firm on the basis of computer records whose copies were taken by Income Tax Officials and whose photocopies have been provided to us as serial numbered 96 of LP-2. In this regard I clarify that the same computer record shows that actual receipt is less by ₹ 23,76,895/- being discount allowed ₹ 23,69,425/- and ₹ 7,470/- being petty cash expenses (recorded in the trial balance as advance to employee) therefore the correct amount of unaccounted receipts is ₹ 6,21,25,115/- and not ₹ 6,45,02,010/-. 11.1 That during the course of survey hundis were found and impounded and the same were offered as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts was transferred by the partners of the firm out of the alleged proceeds of crime. There ought to be some receipt which the assessee could be subjected to tax. There are three limbs of this issue firstly claim of the assessee is that it used to advance hundi loans out of undisclosed/out of books hospital receipts, this is precise explanation offered by the assessee in respect of hundi found during the course of search, secondly the assessee has disclosed the amount of hundi loan as undisclosed hospital receipts, thirdly out of the maturity amount the assessee made other hundis amounting to ₹ 6,21,25,115/- which is the subject matter of the issue. The assessee has contended that the issue is squarely covered by the judgment of Hon'ble Supreme Court rendered in the case of Ananthram Veera Singhaiah Co Vs. CIT 126 ITR 457 (SC) wherein the Hon'ble Court has held as under :- There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited in its bank account. When there is a maturity of hundi as well as investment in hundis normal corollary would be that the amount invested is out of the money received from maturity of hundis, unless adverse material is brought on record. No such material is available on record the Hon'ble Delhi High Court in the case of ITO vs. D.G. Housing Projects in ITA No. 179/2011 vide order dated 1st March 2012 has held as under: 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged inadequate investigation , it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondents computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is erroneous . The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee regarding this issue. In our considered view when there is claim of investment being made out of unrecorded hospital receipts he ought to have made investigation regarding year wise investment. This observation of the Ld. Pr.CIT is sustained. 23. Further, another ground for revising the order of Ld. Pr. CIT allowing higher depreciation claim of the assessee. 24. We have perused rules and case laws as relied on by the Ld. counsel for the assessee. We do not find any infirmity into the action of the assessing officer for granting depreciation @ 40%. Therefore, this ground of the Ld. Pr. CIT is also not sustainable for affirming the action u/s 263 of the Act. 25. Lastly, Ld. Pr. CIT revised the order on the ground that the assessing officer has allowed expenditure of salary amount to ₹ 4,75,90,791/- without verifying whether TDS as per provisions of the Income Tax was made or not. It is stated that the details of TDS was duly filed in support of this contention. The assessee drew our attention to paper book pages 115-116 of the paper book and also pages no. 750-764, therefore, it cannot be inferred that the assessing officer was simply allowed as not verified the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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