TMI Blog2021 (5) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... ases were centralized i.e., the AO of Central Circle-I, Faridabad whereas the impugned assessment order has been framed by the DCIT, Central Circle-I, Gurgaon and, therefore, the order becomes bad in law. Further, once it is held that the present assessment year i.e., A.Y 2014-15 is the year of search, then the limitation for completion of assessment in the instant case expires on 31.03.2016. Since the AO in the instant case has passed the order on 30.08.2016, therefore, the same is barred by limitation. Further, since the AO has not issued the mandatory notice u/s 153C and has passed the order u/s 143(3) and has not obtained any approval from the JCIT before passing the order for the impugned assessment year which is the search year as held by the Tribunal in assessee s own case in the immediately preceding years, therefore, the order is bad in law. Once it is held that the original order passed by the AO is without jurisdiction being passed by the wrong AO, barred by limitation being passed after 31.03.2016 and bad in law being passed in contravention to provisions of section 153C and without obtaining prior approval of the JCIT, therefore, the order passed u/s 263 against suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO for denovo assessment which is not in accordance with law as held in the case of Sunbeam Auto Ltd [ 2009 (9) TMI 633 - DELHI HIGH COURT] - Decided in favour of assessee. - ITA No.2552/Del/2017 - - - Dated:- 21-5-2021 - Shri R.K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Assessee : Shri P.C. Yadav, Advocate For the Revenue : Shri Satpal Gulati, CIT, DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 17th February, 2017 passed u/s 263 of the Act by the CIT, Central, Gurgaon, relating to assessment year 2014-15. 2. Facts of the case, in brief, are that the assessee is a company engaged in the business of real estate. It filed its return of income on 30th September, 2014, declaring nil income. The case of the assessee was selected for compulsory scrutiny and a notice u/s 143(2) of the Act was issued to the assessee on 20th September, 2015. Notice u/s 142(1) along with a questionnaire was also issued on 12th May, 2016. In response to the statutory notices issued by the AO, the assessee appeared before him from time to time and furnished replies which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised in the notice under section 263 of the Act were fully examined and explained during assessment proceedings and there is no basis or reasoning given for holding that the order is erroneous and prejudicial to the interest of revenue. 3. That on the facts and circumstances of the case and in law, the Ld. Pr. CIT had erred in holding that the AO had failed to carry out the enquires called for whereas the fact is that detailed enquiries on all the issues were made before completing the assessment. 4. That on the facts and circumstances of the case and in law, the Ld. Pr. CIT has erred in setting aside the assessment order without recording any finding as to how the view taken by the Assessing Officer on various issues is erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the Act as held in various judicial pronouncements. 5. That on the fact and circumstances of the case and in law, the views expressed by the Ld. Pr. CIT are mere change of opinion or taking a view different from the view taken by the AO after detailed examination of various issues. 6. That in the facts and circumstances of the case, the order passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied the note of satisfaction which is evident from record. However, the assessee came to know of the satisfaction only when the order of the Tribunal was pronounced on 18th September, 2018 in assessee s own case for the preceding years. Therefore, the delay in raising the present grounds of appeal is bona fide and, therefore, the additional grounds should be admitted for adjudication. 8. The ld. Counsel for the assessee, referring to the decision of the Hon ble Supreme Court in the case of CIT vs. Varas International reported in 284 ITR 80 and in the case of NTPC Ltd. vs. CIT reported in 229 ITR 383 and the decision of the Special Bench of the Tribunal in the case of DHL Operators reported in 108 TTJ 152 (SB), submitted that an assessee can raise a legal additional ground or even fresh legal plea at any stage of the proceedings. He submitted that during the A.Y. 2010-11 which is also impugned before the ITAT and pending adjudication vide ITA No.2591 of 2015, the assessee had raised the issue of satisfaction from the beginning of the proceedings at CIT(A) level. However, the issue of satisfaction in the impugned year has skipped the attention of the assessee since the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 153C of the IT Act, 196 the ld. Counsel for the assessee submitted that by virtue of 1st proviso, embodied with section 153C, the date of handing over the documents would become the date of search in the case of other person and previous six year period would have to be reckoned from this date. This according to him means the relevant assessment year of search in the case of assessee would be AY 2014-15 as the date 29.08.2013 falls under ( AY 2014-15) and not AY 2012-13 as assumed by the AO. 9.2.1 Referring to the decision of coordinate Bench of the Tribunal in assessee s own case in ITA No 2592/Del/2015 for AY 2012-13, he submitted that the ITAT has held that the year of search for assessee would be AY 2014-15 and six years to be reopened are 2013-14 to 2008-09. Referring to the following decisions, he submitted that the courts have held that by virtue of the first proviso of section 153C, the year of search would be the year in which documents pertaining to other person were received. a. Jasjit Singh Vs ACIT ITA No-1436/Del/2012 order dated-05.11.2014( Affirmed by High Court) b. CIT Vs RRJ Securties -380 ITR 612(Del) c. CIT Vs Swar Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held categorically that provisions of section 153B are applicable for 7 years. The special provision under Section 153B of the Act in the opinion of the Court carves out a special period of limitation without which search/block assessments would not be completed. The entire provisions under Chapter XIV relating to block assessment, have been termed by the Supreme Court to be a complete code. At the same time, a specific period of limitation prescribed is for completion of original block assessments for the search and seizure proceedings. The period for issuing notice and completion of block assessment for all the concerned years (7 years) is within two years 9.3.1 He accordingly submitted that if we read section 153B in the light of the judgment of Hon ble Delhi High Court in the case of S.K.Jain(Supra) then it is clear that the original order of assessment, against which impugned order u/s 263 was before the Bench was dated 30.8.2016 (Pg. No-15 of the appeal set) and the same was barred by limitation and hence the action of 263 is void ab initio. He submitted that section 153B has two limbs for years of search covered under section 153C of the Act. 9.3.2 Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tta 10.1 He submitted that during the course of assessment proceedings the AO has issued notice of 142(1) on 12.05.2016( Copy at Page NO-5-6 of the PB). Perusal of the questionnaire issued by the AO would show that the AO has sought reply of assessee on each and every point of the accounts of assessee. In fact the questionnaire is a very detailed one and it consists of around 20 main questions which were further divided into sub questions. Therefore the AO has duly played the role of an investigator. Referring to paper book pages 8 to 152, he submitted that after the receipt of the questionnaire, the assessee vide its reply dated 22.07.2016, filed all the necessary documents along with documentary evidences. He submitted that assessee had pointed to the AO, that there was no current year credits from any outsider/ or third party. Impugned year credits are only from the directors of the company. The assessee in order to prove the ingredients of section 68 has filed following documents. a. Confirmations of the directors. b. Proof of identity. c. Copy of ITR d. Bank details etc. 10.1.1 So far as the allegation of the PCIT that the AO has not enquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtified by the settled position of law that, assessee cannot be forced to inform about the source of source and when the unsecured loans are taken from Directors then yard stick applicable for entry operator cases would not be applied. Referring to various decisions, he submitted that if the share application money or unsecured loan is received from associates concerns/ directors, which concerns are duly assessed to tax then addition cannot be made u/s 68. 11. The ld. Counsel for the assessee submitted that even after search and survey of assessee nothing incriminating was found, which would show that Vinod Ambawatta or any of his concerns were indulged in providing bogus accommodation entries or the advances given to the present assessee were unexplained cash credits or the assessee has received its own unaccounted income via Vinod Kumar. 11.1 Referring to page number-12 of the paper book, the ld. Counsel submitted that the opening balance of Vinod Kumar was 4.44 crore and closing balance was 11.5 Crore and assessee has repaid 8.26 Crore (which figure is accepted by the PCIT). He submitted that these entries coupled with the fact that assessments of Vinod Kumar were comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09 11.03.2008- 2,50,000 AY 2008-09 12.1 On the contrary it is an admitted position of fact that in the impugned year assessee has received back the deposits from the concerned parties. The position of closing balance of the impugned year is mentioned at Page Number-6 of the PCIT order. 12.2 He submitted that provisions of deemed dividend are not applicable on assessee, since the assessee has not received any funds in the shape of loan or advances rather given the funds in previous years. Therefore the applicability of deemed dividend concept, if any, would be in the hands of the persons to whom advances were given and not in the hands of assessee. 12.3 The ld. Counsel for the assessee submitted that beside the above inter corporate deposits the assessee has also given deposits to some other persons in earlier years (details were given to AO - page no-24 of the PB which is annexure-8 of assessee s reply). These advances were given for the purchase of land. In fact the AO has enquired from the assessee as to why the provisions of 194IA are not applicable on these advances. He drew the attention of the Bench to the various replies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . All previous years were assessed u/s 153C read with 143(3) and there is not a single document which would show that what assessee has received was his unaccounted money advanced by assessee in previous years and received back in impugned year. Therefore it cannot be alleged that AO has passed the assessment order without looking into the facts properly and his view cannot be termed as erroneous prejudicial to the interest of revenue. 12.5 He submitted that again on Page Number -6 of the impugned order the PCIT has held that genuineness/ credit worthiness of the amounts received back from the aforesaid parties has not been examined. He submitted that so far as the present year is concerned AO was not empowered to invoke the provisions of section 68 to advances received back during the years. And for previous years the assessments were made after survey and search. Therefore it cannot be said that assessee has been able to conceal the facts from the department. Therefore, the view of the AO cannot be termed as erroneous prejudicial to the interest of revenue. The ld. Counsel drew the attention of the Bench to the status of previous years assessments of the assessee which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finance cost is concerned, he submitted that in the current year no advances were given and in previous year no disallowance has been made. In his alternate argument, he submitted that assessee was in possession of huge interest free funds, to the tune of ₹ 4.44 crore and the outstanding advances of the current year were only 51.50 lakhs. Therefore, in view of the decision in the case of Reliance Utility and others reported in 313 ITR no disallowance is permissible and hence the view of the AO for not making any disallowance was plausible. So far as finance cost is concerned, he submitted that finance cost is nothing but the interest paid by assessee on car loan. This amount is coming from previous year (Page No.195 of PB-1). He submitted that the assessee company has incurred following car loans and the finance cost is attributable to them Amount of Loan Initially Date on which taken Opening balance for impugned year Relevant Page No- Interest paid in present year 54,90,000/- 15.02,2012-(AY 2012-13) 44,45,612.30/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at various places that the assessment order has been passed without making proper enquires. However, the PCIT has failed to point out what more enquires the AO ought to have made. Referring to various decisions, he submitted that the phrase proper enquires and inadequate enquires has been considered by various benches of the High Courts and the Tribunal and everywhere it has been held that cases where there is complete lack of enquiry would certainly fall in the ambit of section 263. However, in cases where the allegation is of proper enquires , the burden is on CIT to conduct further enquires by himself and he cannot simply set aside the order of the AO for further enquiries. For the above proposition he relied on the following decisions:- a. CIT Vs DG Housing 343 ITR 239(Del); b. Commissioner of Income Tax vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), c. D.K.Associates in ITA No.5659 of 2016 dated 16.01.2017; 13.5 The ld. Counsel for the assessee accordingly submitted that: a.The order of assessment against which the impugned action of 263 is challenged was barred by limitation and hence the jurisdiction of 263 was also barred by limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 907/2017, C.M. APPL.38789/2017), the Hon'ble DelhI High Court on 20.07.2018 reversed the decision of ITAT which had held that: At the most, it can be a case of inadequate inquiry, in which Id. CIT has no power to intervene under Section 263 of the Act. 6. The Hon'ble Delhi High Court observed that such findings and reasoning of ITAT are 'clearly indefensible' as they amount to putting a gloss over the AO's glaring omissions. Repeated decisions have emphasized that the AO should, at least as regards what appears from the record, and what are the issues inquired into during scrutiny assessment, indicate the briefest of reasons, accepting or rejecting any argument. 7. The Hon'ble Delhi High Court in the case of BSES Rajdhani Power Ltd vs. PCIT dated 08.11.2017 in ITA No 387/2017 has held that the non-consideration of the larger claim of depreciation and the consideration of only a part of it by the Assessing Officer, who did not go into the issue with respect to the whole amount, was an error, that could be corrected under Section 263. 8. In the case of CIT v Amitabh Bachchan (2016) SCC Online SC 484, the Hon. Supreme Court has held that the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 18.09.2018 shows that a search and seizure action u/s 132 was conducted by the department on Krrish Group on 09.11.2011. The seized documents belonging to the assessee were received by the AO on 29.08.2013. Therefore, in view of provisions of section 153C, the date of search in the case of the assessee is 29.08.2013 which date falls under A.Y. 2014-15. Further, the Tribunal in assessee s own case for A.Y. 2012-13 has already held that the year of search for the assessee is 2014-15. We, therefore, find merit in the submission of the ld. counsel for the assessee that the present assessment should have been framed by the AO having jurisdiction after cases were centralized i.e., the AO of Central Circle-I, Faridabad whereas the impugned assessment order has been framed by the DCIT, Central Circle-I, Gurgaon and, therefore, the order becomes bad in law. Further, once it is held that the present assessment year i.e., A.Y 2014-15 is the year of search, then the limitation for completion of assessment in the instant case expires on 31.03.2016. 15.1.1 Since the AO in the instant case has passed the order on 30.08.2016, therefore, the same is barred by limitation. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of section 2(22)(e) on intercorporate deposits is concerned, we find merit in the submission of the ld. counsel for the assessee that all inter-corporate deposits were given in the preceding years and the assessee has, in fact, received the deposits in the current year. Further, even the AO in the order passed subsequent to the 263 order has not made any addition u/s 2(22)(e) of the IT Act, 1961 or disallowed any depreciation on finance cost. 15.6 So far as the issue relating to disallowance of proportionate interest on interest free advances to sister concerns is concerned, it is an admitted fact that most of these advances were given in the preceding years and no such disallowances were made in the assessments completed. Further, the own capital and free reserves were much more than the interest free advances given to sister concerns. Therefore, we find merit in the arguments of the ld. counsel for the assessee that there is no error in the order of the AO on this issue. 15.7 So far s the credits received from Mr. Vinod Ambawatta is concerned, it is an admitted fact that assessments of the above person were done by the same AO u/s 153C who has passed the order in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to examine during the course of the assessment proceedings the affect of change in the accounting policy on the Revenue not disclosed by the assessee but did not point out what type of inquiry or verification should have been carried out in this regard by the AO. How non examination of this aspect has resulted in under assessment. The order passed by the AO, in our opinion, shall be deemed to be erroneous in so far as prejudicial to the interest of the Revenue if the Principal Commissioner would have specifically pointed out which of the inquiries or verification should have been carried out by the AO in this regard and the AO failed to carry out those inquiries and verification as desired by the Principal Commissioner. 15.11 It has been held in various decisions that for invoking the provisions of section 263, the order passed by the AO must be both erroneous and prejudicial to the interest of the Revenue. The twin conditions must be satisfied. Absence of any one condition cannot empower the PCIT to invoke jurisdiction u/s 263 of the IT Act, 1961. The order passed by the AO in the instant case may be prejudicial to the interest of the Revenue but cannot be termed as erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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