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TMI Blog2016 (4) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) of the Income Tax Act, 1961 (Act) determining the total income at Rs. 7,21,900/-. 3. The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue. CIT noticed that during the previous year there was introduction of unsecured loans to the extent of Rs. 1.34 cores. The unsecured loans were raised by the assessee from 19 persons. The assessee had furnished confirmation like photo copy of the income tax returns for the relevant assessment year and photo copy of bank account statement of the creditors. AO deputed an inspector to verify the genuineness of the credits. In respect of the 18 creditors the details of the enquiry done by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee also pointed out that full payment of advances were given by the assessee at the time of assessment and goods were supplied against these advances. The assessee therefore submitted that order of the order of the AO was not erroneous and prejudicial to the interest of the revenue. Jurisdiction u/s 263 of the Act cannot be invoked by the CIT. 7. CIT was however of the view that the AO failed to make proper inquiries with regard to the unsecured creditors. He was also of the view that the report of the Inspector was also similar in respect of all the unsecured creditors and this situation itself should have alerted the AO to make thorough probe. CIT was of the view that order of the AO should be set aside and AO should be directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous and prejudicial to the interest of the revenue. The Hon'ble Delhi High Court in the case of Gee Vee Enterprise -Vs-AddI.CIT{1975} 991TR 375 has held as under: "The reason is obvious. The position and function of the income tax Officer is very different from that of a Civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a Civil Court in the absence of any rebuttal. The Civil Court is neutral. It simply gives decision on the basis of pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of return which is apparently in order but calls for further enquiry. It is his duty to asce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act besides relying on certain judicial pronouncements to which we will make a reference later. The learned DR relied on the order of the CIT u/s.263 of the Act and the decision of the Hon'ble Calcutta High Court in the case of Maithan International 375 ITR 123 (Cal). 10. We have considered the rival submissions. We agree with the contention put forth on behalf of the assessee that where an enquiry is conducted by the AO and he gets satisfied with the genuineness of the transaction, the CIT cannot intervene through revision for coming to a conclusion that the assessment order passed by the AO is erroneous and prejudicial to the interests of the Revenue. The essence of the matter is that the AO should conduct enquiry to satisfy himsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 in which it was observed that the report given by the Inspector was very elementary and simply mentioned that he had verified bank passbooks, profit & loss account and balance sheets of these companies. In none of the reports he had commented on the issue of credit worthiness of the parties. The CIT opined that the AO was required to make proper investigation to determine whether the loan was really made by the third party or it had come out of the resources of the assessee himself. When the matter came up before the Tribunal, the order u/s 263 was set aside by observing that the AO did conduct enquiry and: "if there is an enquiry, even inadequate, that would not by itself give occasion to the ld. CIT to pass order u/s 263 of the Act." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gate regarding the unsecured loans appearing in the balance sheet of the Assessee. 13. As far as receipt of advances from customers by the Assessee and the complaint of the CIT in the order u/s.263 of the Act that the AO ought to have made investigation into such unusual practice which was not prevalent in the concerned trade, we are of the view that even in respect of these advances received against future supplies, proper enquiries ought to have been made by the AO before completing the Assessment because there were several suspicious circumstances which warranted a probe by the AO. Admittedly no such probe has been made by the AO. The reasons given for upholding exercise of jurisdiction u/s.263 of the Act, in respect of unsecured loans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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