TMI Blog2019 (6) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 12 - SUPREME COURT] has held that it is not mere prejudicial to revenue or a mere erroneous view which can be revised but there must be an element of unsustainability which clothes the Commissioner with the jurisdiction u/s 263 of the Act. Also in the case of ITO vs. D.G. Housing Project Ltd [ 2012 (3) TMI 227 - DELHI HIGH COURT] held that in case of inadequate enquiry it is incumbent for the Commissioner to conduct enquiry and not merely remit the matter to the Assessing Officer without conducting any verification/enquiry. Also DELHI AIRPORT METRO EXPRESS PVT. LTD. [ 2017 (9) TMI 529 - DELHI HIGH COURT] . We have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of the Act and we have no option but to quash the same. - Decided in favour of assessee. - ITA No. 2799/Del/2018 - - - Dated:- 21-6-2019 - Shri N.K. Billaiya, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Assessee : Shri Gautam Jain, Adv., Shri Lalit Mohan, CA, Shri Suman Jain, CA For the Department : Ms Nidhi Srivastava, C.I.T. DR ORDER PER SUDHANSHU SRIV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous in so far as it is prejudicial to the interest of revenue since the Assessing Officer has not examined the issue as mentioned above during the scrutiny assessment proceedings. 2.1 In response to the show-cause notice, the assessee, in its reply contended that revision u/s 263 was not warranted as the order of assessment was neither erroneous nor prejudicial to the interest of revenue. It was submitted that the Assessing Officer (AO) had issued a detailed questionnaire and the assessee, vide letter dated 2.12.2015, had duly explained the source of capital introduced by the partner and this was supported by evidences filed along with the said reply. The Ld. PCIT however rejected claim of the assessee and proceeded to hold that the order of assesment was passed without proper enquiry and was, therefore, erroneous and prejudicial to interest of revenue. The AO was directed to pass an assessment order de-novo after examining all the issues/aspects involved in the case after affording reasonable opportunity to the asssessee. 2.2 Aggrieved with the order passed by the Ld. PCIT, the assessee is now before this Tribunal (ITAT) and has challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on following judicial pronouncements: i) 257 Taxman 440 (SC) Pr. Cit v. Vaishnodevi Refoils Solvex affirmed the judgment in the case of Pr. CIT v. Vaishnodevi Refoils Solvex reported in 253 Taxman 135 (Guj) ii) 49 ITR 723 (Bom) Orient Trading Co. Ltd. v. CIT iii) 245 ITR 160 (MP) CIT v. Metachem Industries iv) 252 ITR 344 (P H) CIT v. Barna Electro Corporation v) 11 TMI 630 (P H) CIT v. Metal Metals of India vi) 208 CTR 459 (P H) CIT v. Rameshwar Dass Suresh Pal Cheeka vii) 53 Taxman 135 (Guj) Pr. CIT v. Vaishnodevi Refoils Solvex viii) 141 ITR 706 (All) CIT v. Jaiswal Motor Finance ix) 218 ITR 508 (All) India Rice Mills v. CIT x) 221 ITR 239 (All) Surendra Mahan Seth v. CIT xi) 263 CTR 612 (All) Zafa Ahmad and Co. v. CIT xii) 268 ITR 381 (Pat) CIT v. Md. Perwez Ahmad and Others xiii) 282 CTR 200 (Pat) CIT v. Anurag Rice Mills xiv) 268 ITR 381(Pat) CIT v. Md. Parwez Ahmad xv) 400 ITR 120 (Jhar.) Prayag Tendu Leaves Proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... howing their corresponding loan amounts and capital account of Shaleen Vajpayee alongwith a statement of capital additon is attached for your reference. 5.1 It is further seen that the AO, on consideration of the aforesaid reply in the order of assessment, accepted the claim and explanation by assessee by holding as under: 3. On the CASS reason of Introduction of Capital in a year, vide questionnaire dated 28.10.2015, query was raised. In reply assessee submitted that during the year capital was introduced by one of its partners Sh. Shaleen Vajapyee to commence operation of the firm. The source of the partner was receipt of loan repayment from M/s Jagdish Data Systems Pvt. Ltd. and withdrawal of capital from M/s Jet Tech Systems. The assessee has filed details of capital addition by Sh. Shaleen Vajapyee out of loan repayments received from other concerns. . After due verification of available facts and records and examination of assessee submission, income of the assessee is computed as under:- Returned Income Rs. Nil/- Assessed T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he partner who is assessed to tax and such capital being introduced through banking channels which is also duly confirmed, in such circumstances it cannot be validly alleged and held that the claim was accepted without enquiries in the assessment proceedings, particularly when the evidence in support of capital contribution has been placed on record. 5.4 It is trite law and has also been held by the Hon ble Jharkhand High Court in case of Prayag Tendu Leaves Processing Co. v. CIT (Supra) that under section 68, Assessing Officer, while assessing a Partnership Firm, can ask for source of income of partnership firm, but source of source cannot be examined. In the said case, the Commissioner of Income Tax, while exercising power under section 263 of the Act, revised the assessment mainly on the ground that huge amount of cash was brought to the partnership firm by two partners namely Shri Ranjan Jaiswal and Smt. Anju Jaiswal. Shri Ranjan Jaiswal had brought cash in of ₹ 9,46,126/- and Smt. Anju Jaiswal had brought in cash of ₹ 9,51,563/-. It was also noted that no details had been given as to how the cash had been obtained by Shri Ranjan Jaiswal and Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest in relation to those loans. It is rather strange that although the Assessing Officer has treated the cash credits as non- genuine, he has not made any addition on account of interest claimed as business expenditure and has been allowed by the Assessing Officers. It is also pertinent to note that in respect of some of the creditors the interest was credited to their accounts/ paid to them after deduction of tam at source and information to this effect was given in the loan confirmation statements by those creditors filed by the assessee before the Assessing Officer. Thus it is clear that the assessee had discharged the initial onus which lays on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses GIR numbers/ permanent accounts numbers and the copies of assessment orders wherever readily available. It has also proved the capacity of the creditors by showing that the amounts were received by the assessee by accounts payee cheques drawn from bank accounts of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence of such witness is being taken in the course of the assessment proceeding, the witness has no right, but the assessee has, to be represented by a lawyer or other authorised representative. The assessee is not supposed to know the capacity of the money-lender or the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and how their sources of income are arrived. It is for that specific purpose that Sec.131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the powers of a civil court under Sec.131 and call upon the creditor concerned to prove his capacity to pay and the genuineness of his transaction. Once the ITO or the authority concerned is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay by cross-examining him. Where, therefore, an assessee gives the correct name, address and the G.I.R. number of the creditor, as my learned brother has observed, he has discharged his onus and unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer examined the partners and not accepted the explanation. The Assessing Officer cannot ask the assessee-firm to prove source of a source. Once the firm had offered an explanation and established that the capital was contributed by the partners, the same could not be assessible in the hands of the firm. Unless there are contradictions and inconsistencies in the statement of the partners, the credit cannot be treated as unexplained and cannot be added under Section 68 of the Act in the hands of the assessee-firm. Also, it is clear from the language employed under Section 68 of the Act that only the assessee alone has to offer explanation. If the assessee makes explanation, it is for the Assessing Officer to accept or reject the same. The finding given by the Tribunal is that the assessee- firm had explained the source of the capital and hence the same cannot be assessed as undisclosed income in the hands of the assessee firm. The order of the Tribunal reads as follows:- When the assessee has explained the amounts as capital contributions by the partners, the Revenue authorities are not justified in holding that the assessee has not explained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as creditworthiness of the donors had not been established. The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date. 5.4.6 Thus in view thereof Hon ble Jharkhand High Court has held as under: 7. In view of the aforesaid decisions where assessee has given support of the gift or the amount received from the particular person with necessary documents, such as, copies of demand drafts and cheques etc., no addition could have been made by this appellant in respect of the amount received by the assessee. Under Section 68 of the Income Tax Act, the Assessing Officer while assessing a Partnership Firm, can go behind the source of income of the partnership firm, but he cannot go to source of source . The aforesaid aspect of the matter has been properly appreciated by the Income Tax Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the Principal Commissioner of Income-tax is of the view that the Assessing Officer did not undertake any inquiry, it becomes incumbent on the Principal Commissioner of Income-tax to conduct such inquiry. All that the Principal Commissioner of Income-tax has done in the impugned order is to refer to the circular of the Central Board of Direct Taxes and conclude that in the case of the assessee-company, the Assessing Officer was duty-bound to calculate and allow depreciation on the BOT in conformity of the Central Board of Direct Taxes Circular No. 9 of 2014 but the Assessing Officer failed to do so. Therefore, the order of the Assessing Officer is erroneous insofar as prejudicial to the interests of the Revenue . 11. In the considered view of the court, this can hardly constitute the reasons required to be given by the Principal Commissioner of Income-tax to justify the exercise of jurisdiction under section 263 of the Act. In the context of the present case if, as urged by the Revenue, the assessee has wrongly claimed depreciation on asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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