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Sh. Shri Kishan Jindal Versus C.I.T. -XV, Kolkata

2016 (4) TMI 732 - ITAT KOLKATA

Revision u/s 263 - uninquired unsecured loans - Held that:- No hesitation in holding that the case under consideration is a glaring example of not making a relevant enquiry which amounts to no enquiry and is a case of non-application of mind by the AO. We therefore uphold the order of the CIT u/s.263 of the Act, in so far as it concerns direction to the AO to investigate regarding the unsecured loans appearing in the balance sheet of the Assessee.

Receipt of advances from customers by .....

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the AO. The reasons given for upholding exercise of jurisdiction u/s.263 of the Act, in respect of unsecured loans received during the previous year would equally apply to these advances also. Thus we uphold the order u/s.263 of the Act - Decided against assessee - ITA No.781/Kol/2013 - Dated:- 2-3-2016 - Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM For The Appellant: Shri M.Satnaliwala, FCA For The Respondent: Shri Sachidananda Srivastava, CIT ORDER PER N.V.VASUDEVAN, JM: This is an appea .....

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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 ₹ 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 a .....

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according to the CIT was erroneous and prejudicial to the interest of the revenue. 5. CIT also noticed that the assessee received huge advances from the customers. CIT found that the assessee made single sales to M/s. Gel Marketing Ltd. The assessee also gave huge advances to M/s. Gel Marketing Ltd., and other partiers from time to time. CIT was of the view that these transactions were unusual and the AO failed to make inquiries on the above transactions. 6. In response to the show cause notice .....

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ng advance against sales was not an unusual practice and it is a very common feature in business. Besides the above the assessee 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 vi .....

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i) Huge advances from customers, without corresponding sales or meager sales:- The assessee in his reply has submitted that it is very usual practice in this trade. I have perused these accounts. The assessee has obtained unsecured loans in the garb of customers' advances against sales and has squared up those other than by sales later on. The onus is heavier as no interest has been paid in these cases. For example loan of ₹ 5,00,000/- from M/S Gel Marketing Ltd has been repaid otherwi .....

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. The A.O. didn't take even basic steps to verify this aspect. There is no reference to these even in the assessment order. The Hon'ble Supreme Court in the case of Rampyari Devi Saraogi-Vs-CIT{1968} 67 ITR 84{SC) and Smt. Tara Devi Aggarwal- VS-CIT{1973}8B ITR 323{SC) has held that in the absence of proper enquiries, the assessment order would become erroneous and prejudicial to the interest of the revenue. The Hon'ble Delhi High Court in the case of Gee Vee Enterprise -Vs-AddI.CIT{ .....

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t remain passive in the face of return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of facts stated in the return when the circumstances of case are such as to provoke an enquiry. The meaning to be given to the word "erroneous in section 263 emerges out of this context, It is because it is incumbent on the Income-tax Officer to further such an enquiry prudent that the word "erroneous" in section 263 includes the failure to make .....

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63 of the Act, the said assessment order dated 31.12.2010 is set aside, but only to the extent indicated in foregoing paragraphs. The Assessing Officer is directed to pass a fresh assessment order and re-compute the assessee's income after making further enquiries as directed in the foregoing paragraphs. 8. Aggrieved by the order of CIT the assessee has preferred the present appeal before the Tribunal. 9. We have considered the submissions of the learned counsel for the assessee and the lear .....

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ehalf 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 himself about the genuineness of transactions. What is an enquiry may have different shades in different circumstances. T .....

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papers on record cannot at all be considered as conducting an inadequate enquiry. Such latter cases fall within the category of no enquiry at all because of the inaction of the AO to read a writing on the wall. 11. At this juncture, we would like to deal with the judgment of the Hon ble jurisdictional High Court in the case of CIT Vs. Maithen International 375 ITR 123 (Cal). The assessee in that case obtained loans aggregating to ₹ 1.60 crore from six private limited companies ranging bet .....

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oned 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 co .....

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nquiry was not made, the Hon ble High Court held that the order was to be considered as erroneous and prejudicial to the interests of the Revenue. It set aside the view of the Tribunal on inadequate enquiry by holding that: If the relevant enquiry was not made, it may in appropriate cases amount to no enquiry and may also be a case of non-application of mind. It further observed that the question of inadequate enquiry should be understood in its proper perspective and: if it can be shown that th .....

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