TMI Blog2012 (6) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The ld. C.I.T. having failed to point out such error, no error can be inferred from the order of A.O. for the simple reason that the same is bereft of details. - Revision u/s 263 on second ground is also not valid. - Decided in favor of assessee. - IT APPEAL NO. 559 (KOL.) OF 2009 - - - Dated:- 24-6-2011 - SMT. DIVA SINGH, C.D. RAO, JJ. Ravi Tulsiyan for the Appellant. D.R. Sindhal for the Respondent. ORDER C.D. Rao, Accountant Member The appeal by the assessee is directed against the order dated 31.12.2009 of ld. C.I.T., Central Circle-VI, Kolkata passed u/s. 263 of the Act for assessment year 2004-05. The assessee has raised the following grounds :- (1) That the Ld. CIT erred in passing an order u/s. 263 of the I.T. Act, 1961 on the basis of suspicion, conjecture and surmises. (2) That the Ld. CIT erred in holding that the A.O. had not verified the applicability of section 92 of the Income Tax Act, 1961, completely disregarding the fact that there was nothing on record to show that any transaction had taken place with any associated enterprise and therefore, the initiation of proceeding itself was not as per law and purely on conje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 4. In respect of the first point regarding reference to Transfer Pricing Officer for determination of ALP u/s 92 of the I.T. Act, it was submitted by the ld. AR. that no part of the total export turnover amounting to ₹ 11.97 crores relate to any sales made to any associated concern. The A.R. has submitted that none of the condition as specified in Sec. 92A are fulfilled and none of the parties to whom sale were made are associated enterprises of the assessee. The A.R. has also submitted a list of the parties to whom sales were made. This is already available on record. The A.R. has also submitted a certified list of the associated enterprises during the financial year 2003-04. Assessee has certified that during the year under reference, the firm had not entered into any international transactions involving purchase or sale of any goods or any services or facilities with any concern which was an associated enterprise within the meaning of Sec. 92A of Income Tax Act. 5. As regards the second point, regarding genuineness of the sources of unsecured loans from six parties, it was submitted by the ld. AR. that the assessee had duly filed all the loan confirmations fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction has been made with the associated enterprises during the year. In my opinion, a detailed examination of the accounts of the assessee is necessary in this regard to determine whether a reference was necessary u/s 92 of the Income Tax Act. Such detailed examination of accounts is not possible during the proceedings before me. This should be done at the appropriate level of the assessing officer. 9. As regards the unsecured loans, it is seen that the assessee obtained loan aggregating to ₹ 1.60 crores from six private parties, creditworthiness of which are doubtful. These are as under:- Name of the creditors Amount of loan Return income of the creditors Sumsung Estates (P) Ltd. ₹ 10,00,000/- ₹ 5,560/- Woodhat Distributors (P) Ltd. ₹ 1,10,00,000/- ₹ 5,40,920/- Rashraj Impact (P) Ltd. ₹ 9,00,000/- Nil Shagun Tie Up (P) Ltd. ₹ 9,00,000/- ₹ 11,750/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated the submissions made before the ld. C.I.T. He further referring to the notice of ld. C.I.T. issued u/s. 263 of the Act submitted that the said notice is silent on the issue of associated enterprise. Section 92 of the Act is applicable only in case of associated enterprise and the notice u/s. 263 issued by the ld. C.I.T. was presumptive, inasmuch as only because of export sales, provisions of sec. 92 of the Act cannot be applied. He submitted that unless there is any international transaction with associated enterprise of the assessee, Transfer Pricing provisions are inapplicable. He submitted that during the year under appeal, the assessee had not entered into any international transaction involving purchase or sale of any goods or any service/facilities with any of its associated enterprise within the meaning of sec. 92A of the Act. Tax Audit Report also makes no reference to any such transaction. He further submitted that the list of the parties to whom sales were made and a certified list of the associated enterprises, all being domestic companies, were filed before the ld. C.I.T. The A.O. was not required the list of associated enterprises because of the fact that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of loan transactions. The ld. A/R further submitted that the ld. C.I.T. has tried to replace his view with the view of A.O., which is not permissible as per provisions of sec. 263 of the Act, on the understanding that the A.O. had not examined the creditworthiness of the lenders ignoring the fact that the A.O. had collected all relevant materials and after examining the same, decided the issue. He further submitted that the ld. C.I.T. laying emphasis on cheque deposits in the bank account of lender-companies before giving cheque to the assessee stated that such source of source should have been examined. The ld. A/R referring to the decision in the case of Nemi Chand Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 (Gau.)] submitted that source of the source is not relevant to decide the issue of loan transactions. The A.O. after examining the evidences collected from the lenders and considering the evidences placed before him has taken a possible view which he deemed fit and the ld. C.I.T. cannot replace her own view by invoking provisions of Sec. 263 of the Act directing the A.O. for further enquiry in the matter. He further submitted that action u/s. 263 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative relied on the following case laws :- Motilal Bimalchand Jain (HUF) v. CIT [2006] 285 ITR 224 (MP) Smt. Renu Gupta v. CIT [2008] 301 ITR 45 (Raj.) Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi) Dawjee Dadabhoy Co. v. S.P. Jain [1957] 31 ITR 872 (Cal.) CIT v. South India Shipping Corpn. Ltd. [1998] 233 ITR 546 (Mad.) 8. We have heard the rival contentions of the parties and perused the orders of ld. C.I.T. as well as A.O. We have also gone through the evidences placed on record. The ld. C.I.T. initiated proceeding u/s. 263 of the Act on two counts, viz. (i) the A.O. had not verified the applicability of sec. 92 of the Act before allowing export turnover of the assessee; and (ii) sufficient enquiry had not been carried out in respect of the lenders while allowing receipt of unsecured loans by the assessee-company to the tune of ₹ 1.63 crores. In regard to the first objection, we observe that the notice issued by the ld. C.I.T. was restricted to deficiency of the A.O. in not making any reference to T.P.O. for determination of arms length price as per sec. 92 of the Act. However, in the order passed u/s. 263 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprises before the A.O. and it was for the first time submitted before the ld. C.I.T. Basing on this incidence, the ld. C.I.T. presumed that due to non-filing of such list of associated enterprises, the assessment made by the A.O. on this issue is defective, causing prejudice to the revenue. We are of the considered opinion that when on the facts and circumstances of the case and evidence on record there was no requirement of taking into consideration the list of associated enterprises, more so when there was no international transaction with them, the A.O. did not commit any mistake in not asking for such list. Therefore, considering the nature of transaction when there was no requirement of list of associated enterprises as per law, no valid presumption arises about lack of enquiry on the part of the A.O. Provisions of Sec. 263 of the Act are applicable when no enquiry at all on an issue is undertaken by the A.O., which makes the assessment order erroneous and prejudicial to the interests of the revenue. But, as stated above, such circumstances are not found to be existed in the case of the assessee so far as the instant issue is concerned. We, therefore, find the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the A.O. 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) of the Act just to re-examine or re-verify the issues already examined/verified at the assessment level. It is only when an order is erroneous that the section will be attracted. In the case before us, it is not disputed that the A.O. made enquiries and gone through the documents collected from the lenders and then decided the issue which he deemed fit in the circumstances of the case. The ld. C.I.T. stated that the A.O. failed to make any enquiries regarding creditworthiness of the loan creditors. This observation, in our considered opinion, is not correct on the face of the enquiry conducted by the A.O. When the A.O. verified/examined the return of income, balance sheet, P/L Account, bank statement, confirmation etc. of the lenders and also perused the Inspector's report, it goes without saying that the A.O. considered the creditworthiness of the loan creditors also. Therefore, it is not the case that the ld. A.O. did not make any enquiry at all. In our opinion, the entire exercise u/s. 263 of the Act was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes certain assessments, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order does not speak about the issue or the order should have been written elaborately. The order of the A.O. may be brief or cryptic but that by itself is not sufficient to brand the assessment order as erroneous or prejudicial to the interest of revenue. Writing an order in detailed may be a legal requirement but the order not fulfilling this requirement cannot be said to be erroneous or prejudicial to the interest of revenue reasons being the A.O. has already made enquiries by issuing notice, considering the assessee's reply to the notice issued, deputing Inspector and obtaining several evidences in respect of the claim of the assessee. In the case of the assessee, the ld. C.I.T. could not point out as to what was the error committed by the A.O. in not having considered the applicability of Sec. 92 of the Act and in accepting the unsecured loan taken by the assessee. The ld. C.I.T. having failed to point out such error, no error can be inferred from the order of A.O. for the simple reason that the same is bereft of details. Accordingly, we are of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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