TMI Blog2021 (8) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO u/s 143(3) of the Act is erroneous and prejudicial to the interest of Revenue. In the instant case Ld. Pr. CIT failed to show that both conditions exists i.e. neither it has been proved that order is erroneous nor it has been proved to be prejudicial to the interest of revenue. We thus find merit in the contentions of the assessee that the revisionary order passed by the Ld. Pr. CIT in the years under appeal i.e. A.Y. 2013-14 is beyond the scope of section 263 and hence not valid. Thus the action of the Ld. Pr. CIT is contrary to the ratio laid down by binding precedence. We, therefore, quash the impugned order and decide in favour of the assessee. - ITA No.493/Ind/2018 - - - Dated:- 20-7-2021 - Hon ble Rajpal Yadav, Vice President And Hon ble Manish Borad, Accountant Member For the Appellant : S/Shri Sumit Nema Sr. Adv. With Gagan Tiwari Piyush Parashar Advs. For the Revenue : Shri S.S. Mantri, CIT-DR ORDER PER MANISH BORAD, A.M The above captioned appeal filed at the instance of the assessee for Assessment Year 2013-14 is directed against the order u/s 263 of the Act framed on 28.03.2018 by Ld. Pr. Commissioner of Income Tax- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. If the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. The second option available u] s 263 (1) of sending the entire matter back to the AO for a fresh assessment. can be exercised by the PCIT only after he undertakes an inquiry himself and not otherwise. Thus the present order u/ s 263 is vitiated on this ground alone. 2. Brief facts of the case as culled out from the records are that the assessee is a Private Limited Company engaged in the business of purchase, sale, taking on lease, letting out development/ construction of property. E- return of income filed on 27.09.2013 declaring loss of ₹ 51,72,569/- which comprises of depreciation loss at ₹ 1,53,066/- and business loss of ₹ 50,19,503/-. Case selected for scrutiny assessment through CASS for the reason large unsecured loans . Notices u/s 143(2) 142(1) of the Act duly served upon the assessee along with detailed questionnaire seeking various information from the assessee including the details of unsecured loans. Reply was filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the same date of giving loan to the assessee, the creditworthiness of the lender is not proved. 4. The A.O. should have inquired about the surrounding circumstances in respect of the loan in question. On verification of details submitted by M/s Gliter Deal Mart Pvt. Ltd it is seen that the registered office of the said C0111pany is based at Kolkata, It is further seen that the company has shown income for A.Y. 2013-14 at ₹ 11,457/-. On perusal of annual account submitted by M/s Gliter Deal Mart Pvt. Ltd it is noticed that the company is having share capital of ₹ 32.42 lakhs and is having security premium account of ₹ 7.96 Crores. Despite having such huge reserves and surplus the company has not shown any significant business transactions and net income for 31.03.2013 is shown at ₹ 3540/- only. As regards the Source of funds it is seen that the lender company has received an amount of ₹ 55,00,000/- from M/s Gielle Investment on 28/02/2013 out of which ₹ 45,00,0001- has been given to the assessee on the same date. In the same way ₹ 30,00,000/- has been received from GielIe Investment on 28/02/2013 and given to the assessee on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self is doubtful. Further the Source in the hands of these companies is RTGS/cheques received from some other parties on the very same day. The creditworthiness of these companies should have therefore have been verified by the A.O. properly and the genuineness of the cash credit should also have been verified in view of the fact that the amount in the bank account of the assessee has been deposited just before advancing loan to the assessee. It is not. out of place to mention here that the assessee has received total unsecured loans at ₹ 21.07 Crore during the year under consideration which includes unsecured loans of ₹ 1,85,50,000/- during the year from M/s Jayant Securites and Finance Ltd., Baroda, loans from the said company was held as unexplained cash credit in the case of Muktilal Laduram Prop. Shivashakti Trading, Co. , Sendhwa for A. Y. 2014-15. Therefore, in this case also the unsecured loan from the said company should have been treated as unexplained cash credit. You are, therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of AO dated 07/03/2016 is erroneous in so far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information u/s 133(6) of the Act to which most of the cash creditors have replied confirming that they have given unsecured loan to the assessee on interest. It was also submitted before Ld. Pr. CIT that interest on all the unsecured loans was duly paid/credited after deduction of tax at source and these unsecured loan have been repaid in subsequent years. Reliance was also placed on various judgments submitting that since the Ld. Assessing Officer has made proper application of mind, conducted requisite enquiry, taken one of the plausible views permissible under the Act, the revisionary power used by the Ld. Pr. CIT was not justified and liable to be dropped. It was also submitted that the most of the cash creditors mentioned by the ld. Pr. CIT in the show cause notice referring them to be accommodation entry provider is not correct since most of these cash creditors have been assessed after scrutiny by the Revenue authorities u/s 143(3) of the Act and even some of the cash creditors have even moved to the higher judicial forums challenging the orders of Ld. Assessing Officer Ld. CIT(A) which itself prove their identity and genuineness. It was also submitted that all the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed consequence to 133(6) notices. It appears that somebody on behalf of those parties filed the information before the as there is no evidence of the mode i.e. whether it was received by courier or post, is there these parties are:- Sr. No. Name 1 Apanapan Mercantile P. Ltd 2 Jayant Security Finance 3 Vishwajyoti Trading Ltd. 4 Creative Technocom P. Ltd. 5 Enit Investment P. Ltd. It is further observed from records that the letter issued by speed post to Jayant Security Finance Ltd. was received back unserved with the remark not know/left however, subsequently somebody filed the information/confirmation on behalf of Jayant Security Finance Ltd. with the letter 1st April 2013 whereas the notice calling for information was issued on 16.02.2016. Further, information by post was received from Crest Vanijya P. Ltd. Bhimtal Nirman P. Ltd., Tropical Vyapar P. Ltd., Winsher Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has himself filed the confirmation before the AO. It is interesting to note that one confirmation for Jayant Security was filed by the assessee himself in response to the questionnaire and another confirmation for the same company was filed before the AO in response to notice u/s 133(6). Both the confirmations are dated 01.04.2013 and have been signed by someone from Jayant Security Finance Ltd. however, the signatures on both the confirmation s are different. There is another confirmation on record which is dated 19.02.2016 the signatures on these confirmations do not match with the confirmation filed earlier. These signs are clearly that of a company which is involved in entry business or is existing merely on paper. The AO has failed to make further inquiry in this case as well. Incidentally this company has not attached its bank account with the reply filed in response to notice u/s 133(6). However , the bank account was filed by the assessee himself during the course of scrutiny proceedings. The bank accounts of this company also show circulating entries and therefore, this is also clear case of further investigation. The most important point is that all this loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making further investigation in the loan transactions vide this office letter dated 23.03.2018. The report still awaited. Regarding Jayant Securities and Finance Ltd. it has further been noted that in the case of Girish Kumar Tayalin Circle-5(1) Indore the loan transactions from this company were investigated and the statements of the directors were also recorded in which they have admitted about the bogus nature of transactions. This also clearly shows that the credit entries from this company are also not above board. In this case also I have written a letter to Pr. DIT, Investigation , Surat in whose jurisdiction the registered office of the company falls, to further investigate the transactions of the assessee with the company. It is clear from the above that the assessing officer has not made sufficient enquiry and investigation even in spite of several reasons for doing so. He should have made complete enquiry regarding in the creditworthiness of the depositors as the balance sheet, bank account and other facts that the loan was without security. Many companies were operating from Kolkata which is a known place for giving accommodation entries and the manner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the point of view of proviso to section 68, which is applicable from 01.04.2013. He should have enquired in detail about the sources of the credit given by the creditors. It may not be out of place to refer to the provisions of Explanation-2 to section 263 which reads as under :- Explanation 2.- For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner. (a) the order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief wihtout inquiring into the claim; (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. Accordingly, the provisions of clause (a) of the explanation are applicable in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiries or verification in the matter. The judgement relied by the assessee in the case of Hotz Industries Ltd. (49 Taxman.com367) (Delhi) is also respectfully distinguished. In the present case it is clear from the facts that the creditworthiness of the creditors was not adequate. Regarding the issue of inadequate enquriy/lack of enquiry/no enquiry, the objection is not acceptable as with the amendement in Explanation 2 to section 263 the issue has been taking care of. The present case is the case where inadequate enquiry or lack of enquiry is there. He just issued notice u/s 133(6) and didn t make any further investigation inspite of so many apparent discrepancies in the responses received. The judgments which have been relied by the assessee are prior to amendement of Explanation 2. The reliance is also to placed on the judgement of ITAT Kolkata in the case of Subhlakshmi Vanijya P. Ltd. 172 TTJ 721 (KOL). This judgment has been discussed in detail in the subsequent paras. The judgements in the case of Ameera Eneterprises Ltd. and Naryan Rane which deals with the amended Explanation 2 are also respectfully fdistinguished as theh facts of the present case are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. [Para 17.c.] There remains no doubt whatsoever that in the given circumstances, the Assessing Officer conducted half-baked enquiry ignoring vital aspects which were required to be examined, ........................confronted with such peculiar and hair-raising circumstances, the Assessing Officer should have not alerted and dug the matter deep for unearthing the reality of the transaction. Unfortunately, nothing of this sort was done by him. It is a perfect citation for a complete non-application of mind by the Assessing Officer and of passing the assessment order in undue haste. [Para 17.h] Thus, there can be no escapee from an axiomatic conclusion that in all these cases the enquiry conducted by the Assessing Officer s is exceedingly inadequate and hence fall in the category of no enquiry conducted by the Assessing Officer, what to talk of charactering it as an inadequate enquiry . The highly inadequate enquiry conducted by the Assessing Officer resulting in drawing incorrect assumption of facts, makes the orders erroneous and prejudicial to the interests of the revenue. [Para 17.i] Q. Whether Commissioner can set aside the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, the obtaining of the documents and the application of mind thereon, without a further outside enquriy, may mean that the Assessing officer did conduct enquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it, then a mere collection of documents cannot be held as conducting enquiry, leave aside, adequate or inadequate. In such later cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a particular transaction cry hoarse about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of papers on record in such circumstances cannot be construed as conducting a proper enquiry. If in such circumstances, the Assessing Officer simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of no enquiry because of the ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the commissioner is empowered to set aside treh assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, the Assessing Officer can t be said to have taken a possible view and it is not further required on the part of the Commissioner to expressly show where the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of section 263. [Para 21.g] 6.2 The excerpts from other important judgments on the revisionary powers of Commissioner are reproduced hereunder. 6.2.1 CIT VS AMITABH BACHCHAN [2016] 384 ITR 20 (SC): Making a claim which would prima facie disclose that the expense in respect of which deduction had been claimed had been incurred and thereafter abandoning/withdrawing the same gave rise to the necessity of further enquiry in the interest of the revenue. The notice issued under section 69C could not have been simply dropped on the ground that the claim has been withdrawn. Therefore, the Commissioner was perfectly justified in coming to his conclusions in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of them is absent if the order of the ITO is erroneous ............prejudicial to the revenue or if it is not erroneous but is prejudicial to the .........ecourse cannot be had to section 263(1). ..........rompton Greaves Ltd. [2017] 82 taxmann.com 246 [Mumbai-ITAT ...........C) .......that on perusal of the said assessment order it was clear that the Assessing ........had not made any enquiry with respect to the claim of deduction of the assessee-company with respect to provisions for warranty charges, excise duty, .......tax and liquidity damages amounting to ₹ 17.72 crores claimed as deduction by the assessee-company from the income of the assessee-company and the claim made by the assessee-company was accepted by the Assessing Officer without any further enquiry, examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company and check from the investigation Directorate of the Jurisdiction to which the lender company belongs. The database which contains information about the Penney stock/shell companies and the companies in the business of issuing accommodation entries should be verified to check whether these companies are involved in this business and whether any investigation has been done by the departmental authorities earlier. For this purpose, he is directed to take help of the Investigation Wing to get the matter completely examined. The line of investigation/inquiry is only inclusive and he is free to make any other investigation on the issue as deemed fit by him. He is further directed to pass a detailed speaking order as per the law after making necessary verification, inquiries and investigations as indicated above., 7. Being dissatisfied with the impugned order u/s 263 of the Act the assessee preferred an appeal before this Tribunal. Ld. Senior counsel for the assessee firstly took us through following submissions filed by the assessee before Ld. Pr. CIT during the proceedings u/s 263 of the Act. On the date of hearing which was fixed for 25.01.2018, an adjournment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the learned Assessing officer is erroneous in so far as it is prejudicial to the interest of the revenue. Therefore, considering the inspection of records of the learned Assessing Officer.......being audit objection was dealt by him and thus, issuing notice u/s 263 is ....void. In this regard reliance is placed on the following decisions :- In view of the above, the show-cause notice u/s 263 is ab-initio void and requires to be quashed. Without prejudice to the above and perusal of the records of the learned Assessing Officer reveals that during the course of assessment proceedings required details of unsecured loans such as confirmation letters, audited final accounts, ITR with computations were filed. The learned Assessing Officer has also, made independent required inquiries from loan creditors u/s 133(6) including the creditors as specified hereinabove. That most of the replies were received from loan creditors in response to notice u/s 133(6). After reaching to the satisfaction with the after inquiry, the learned Assessing Officer has passed the order. During the course of inspection of records with Assessing Officer it is found that the reply was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 observed that the assessing officer it appears had not caused any inquiries or investigation, but accepted the contention of the assessee. Commissioner observed, therefore, meaningful inquiry should be conducted. This does not meet the requirement that the decision of the assessing officer should be erroneous. Once inquiries were conducted and a decision was reached by the assessing officer, it cannot be said that it was a case of no inquiry. In such cases, the Commissioner must reach a finding that the finding of the assessing officer was erroneous, not because no inquiries were conducted, but because the final finding was wrong and untenable. Once inquiries were held and the assessing officer formed a belief, the finding/opinion formed can be set aside only when it is erroneous and not because no inquiries or inadequate inquiries were conducted. From the above it is clear that the power u/s 263 is to be exercised in the case of no inquiry and not in the case of inadequate inquiry or lack of inquiry whereas the cawe of the assessee is not even a case of lack of inquiry. The learned Assessing Officer had passed the assessment order only after co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is held that the Id. PCIT has not referred to Explanation 2 of section 263 which has been inserted with effect from 01.06.2015 however we agree with the finding of the coordinate bench in the case of Narayn Tatu Rane (supra), wherein it has been held that Explanation cannot said to have overridden the law as interpreted by the various High Courts, where the High Courts have held that before reaching a conclusion that the order of the AO is erroneous and prejudicial to the interest of revenue, the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of revenue. In the case of Naryan Rane a doubt is also expressed regarding the applicability of Explanation 2, which was inserted by Finance Act.2015 w.e.f. 01.06.2015, the bench also observed that if the Explanation is interpreted to have overridden the law as laid down by various High Courts, then the same would empower the Pr. CIT to find fault with each and every assessment order and also to force the AO to conduct enquiries in the manner preferred by the Prt. CIT, thus prejudicing the mind of the AO, however, the intention of the legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Assessing Officer in the instant case cannot be termed as erroneous unless it is not I accordance with law. Since, there is no issue in the order which can be said that the same is unsustainable in law and therefore, the first limb of section 263 i.e. the order is erroneous, is absent and needs to be quashed. Without prejudice further, to the above fit is submitted that the second limb of section 263 ie. The subject order is prejudicial to the interest of revenue. It is submitted that the instant case is related to receipt of unsecured loans and the same is covered by the provisions of section 68 of the Act, which have been judicially considered by several courts of law, wherein it is categorically been held that addition u/s 68 can be made where an assessee fails to prove identity of the creditor; his creditworthiness and genuineness of the transaction. In the present case it is necessary to prove that on all 3 ingredients the assessee had failed and, therefore, addition is warranted. It is addition u/s 68 of the Act. In this case all the evidences were filed which have been verified by the learned Assessing Officer independently by way of issue of notices u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as stated above, no evidence was available on record by which the department may reach to the conclusion that the unsecured loan money has been brought in the name of the loan creditor companies by the assessee company itself. In this regard reliance is placed on the following decisions.:- a. Jt. CIT v. Durga Charitable Society Vice-Versa 2017 TaxPub(DT) 4549 (Del-Trib); b. Reliance Corpoation Anr. V. ITO Anr. 2017 TaxPub(DT) 1443 (Mum-Trip); c. ACIT v. Prem Anand 2017 TaxPub(DT 1296 (Del-Trip); d. Sanghvi Realty (P) Ltd. V. Dy. CIT 060 ITR (Trib) 0150 (Mum-Trib). Hon ble Apex Court in the case of CIT vs. Daulat Ram Rautmal 87 ITR 349 (SC) has held that onus to prove that the apparent is not the real is on the person who claims it to be so. Therefore, the onus is on the department to prove that the unsecured loan granted to the assessee company by the above named loan creditor companies are not the money of the loan creditor companies but, of the assessee company. However, your goodself has doubted the genuineness of the insecured loan money on surmises and conjecture and has not brought cogent material on record to establish the bogus nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 133(6). Such details must have been examined by the departmental audit team and after their examination only in the matter of M/s Gliter Dealmart P. Ltd. They could have observed that credit worthiness was not established. In this regard it is submitted that once the enquiries have been made and the Assessing Officer is satisfied as per his own discretion, no comment is permissible unless contrary is available in case records. Presuming but, not admitting the observation of the learned Audit party is within their jurisdiction, their observation is also, having no force. In this regard it is submitted that the said company has advanced funds in ordinary course of their activities to the asseessee company and so also, replied to the summons / notice issued to it u/s 133(6) by the learned Assessing Officer. The perusal of the Balance Sheet of the said creditor reveals that as on 31.03.2012 net worth of the company8 was at ₹ 8,28,82,924/- and as on 31.03.2013 was at ₹ 8,28,88,407/-. Revenue from operations of these two years were at ₹ 15,29,013/- and ₹ 65,84,827/- respectively. This, objection raised by the audit team on creditworthiness of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Ltd. At ₹ 1,85,50,000/- even no question was raised on the genuineness of such lenders in audit objection and it is referred only in show-cause notice u/s 263 stating that loans from the said company was held as unexplained cash credit in the case of Muktilal Laduram Prop. Shivashakti Trading Company, Sendhwa, for A.Y. 2014-15. In this regardit is submitted that the acts of the above case are not made known to the assessee company. It is mandatory for the authorities to provide copy of evidences, if the same is being used against the assessee. It is also, pertinent to note that the assessment of M/s Jayant Securities and Finance Ltd. Was completed u/s 143(3) (copy enclosed). Thus, the all ingredients are automatically treated as complied with as the assessment is completed u/s 143(3) of the cash creditor company. And thus, there is no reason to treat the cash credits in the name of M/s Jayant Securities Finance Ltd., as unexplained on the strength of addition made in other cases and therefore, the reason about alleged paper companies is having no force. It is also, important to note that most of the loan credits have been repaid through proper banking channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd. [2009] 317 ITR 249(Delhi) b. CIT vs. Ashish Rajpal [2010] 320 ITR 674 (Delhi) c. CIT vs. D.N. Dosani (2008) 280 ITR 275 10. Ld. Counsel for the assessee also submitted that ld. Pr. CIT has himself observed that the source of unsecured loans received from the alleged cash creditors was transferred from other companies to the cash creditors. So the source of source is through banking channel only. Most of the cash creditors have been assessed under the provisions of section 143(3) of the Act and no adverse view has been taken by the revenue authorities in the assessment order so passed. All the cash creditors are having sufficient funds to give loan to the assessee. They are having sufficient share capital, share premium and reserves surplus and also carrying out regular business activities and are mostly engaged in the business of earing interest. Most of these companies have replied to notice u/s 133(6) of the Act. Detailed enquiry was conducted by the Ld. Assessing Officer to examine this aspect. 11. Ld. Sr. Counsel for the assessee further submitted that proviso inserted by the Finance Act 2010 w.e.f. 01.04.2013 u/s 68 of the Act is not applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.G. Housing Projects Ltd. 92012) 343 ITR 329 (Delhi). 14. Further reliance was also placed on the following decisions: S.NO PARTICULARS PAGE NOS. 01 Cadila Pharmaceuticals Ltd (ITAT Ahmedabad Bench) 01-10 02 Madhusudan Industries Ltd (ITAT Ahmedabad Bench) 13-22 03 Pr Commissioner of Income-Tax Vs Narayan Balmukand Dubey [2017 30 ITJ 335 (M.P)] 23-35 04 Director of Income Tax Vs Jyoti Foundation [(2013) 357 ITR 355 (Delhi)] 36-41 05 Commissioner of Income Tax VS Ratlam Coal Ash. Co [(1988) 171 ITR 141 (M.P)] 42-43 06 Commissioner of Income Tax Vs Mehrotra Brothers [(2004) 270 ITR 157 (M.P)] 43-44 07 Commissioner of Income Tax, Delhi Vs International Travel House Ltd [(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 142(1) was duly replied. Independent information called u/s 133(6) of the Act from various cash creditors. After making few addition income assessed u/s 143(3) of the Act. Subsequently, notice u/s 263 of the Act was issued by Ld. Pr. CIT mentioning few cash creditors alleged to be accommodation entry provider. Assessee applied for inspecting the assessment records as submitted by the assessee in the submission filed during the revisionary proceedings that audit objection was with regard to one of the cash creditor and certain documents were needed. The same stood filed in the assessment records and Ld. AO duly replied to the audit team. 18. However, Ld. Pr. CIT has observed that he had made an independent decision on the basis of his examination of assessment records to invoke the provisions of section 263 of the Act and issued show cause notice. 19. Before proceeding to examine the facts of the case as to whether Ld. Pr. CIT has rightly assumed jurisdiction u/s 263 of the Act and whether he has justified in holding the order of Ld. A.O as erroneous and prejudicial to the interest of revenue, we will first go through the relevant provision of Section 263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner,-- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.--In computing the period of limitation for the purposes of sub- section (2), the time taken in giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Commissioner under section 263(1), has force. Under section 263(1) two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must be erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner can not exercise the revisional powers under section 263(1) of the Act. There cannot be any prejudice to the revenue on account of the ITO's failure to follow the procedure prescribed under section 144B, and unless the prejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate revenue due to the exchequer has been realised or not or can be realised or not if his orders under consideration are allowed to stand. For arriving at this conclusion, it becomes necessary and relevant to consider whether the income in respect of which tax is to be realised, has been subjected to tax or not or if it is subjected to tax, whether it has been subjected to tax at a rate at which it could yield the maximum revenue in accordance with law or not. If income in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree. If cannot be treated as erroneous order, unless the view taken by the Assessing Officer is unsustainable under law . (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervation of Ld. Pr. CIT was that most of the above stated companies are Kolkata based and have given unsecured loans to assessee without any security. All these companies are not having any major financial activities and they appear to be paper companies. However, in the impugned order Ld. Pr. CIT on one hand referred to 9 cash creditors in the show cause notice and also discussed the financial short coming and raised doubts on the working of all these 9 cash creditors but surprisingly in the end while setting aside the order u/s 143(3) of the Act dated 07.03.2016 directed the assessee to examine all the unsecured loan taken by the assessee company during F.Y. 2012-13 amounting to ₹ 21.07 cr. It is a settled judicial principle and held by various Hon'ble Courts including those in the case of CIT vs. Contimeters Electricals (P) Ltd. [2009] 317 ITR 249(Delhi), CIT vs. Ashish Rajpal [2010] 320 ITR 674 (Delhi) c. CIT vs. D.N. Dosani (2008) 280 ITR 275 that Ld. Pr. CIT cannot go beyond the reasons mentioned in the show cause notice and therefore, giving direction to examine all the unsecured loans is prima facie not at all justified and beyond jurisdiction of Ld. Pr. CIT. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as required as per law. 18. Please give the confirmation of all unsecured loans taken during the previous year and of all additions to the old unsecured loans. Please give the confirmations of the squared-up loans as well. The confirmations should be in the standard format(complete in all respect) giving all details like the ledger accounts, PAN of lender, complete postal address, his signature with date, the signature of the assessee and so on and so forth. You are kindly requested to prove the identity of the subscribers, the genuineness of the transactions and the creditworthiness of the subscribers as required as per law. 19. Please give the details of the security in the form of properties/assets/valuables etc. mortgaged with the banks etc. for taking loans and other facilities etc. please also provide the ownership details of such securities and the income derived, if any from such properties. 30. The assessee replied on 16.02.2016 filing some of the details stating as follows:- 1. Details of purchase of land has been annexed in Annexure no.1 containing details of seller of the assets, survey no., areas in hectare, cost of land, stamp value, regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have replied to notice 133(6) of the Act, details of which are summarized as follows: S. No. Annexure Particulars Page No. III Submissions/documents filed by creditor companies in response to notice issued u/s 133(6) of the Act during the assessment proceedings of M/s Radheswari Developers Pvt. Ltd. A Regarding M/s Winsher Commercial Pvt. Ltd. 1 Notice issue u/s 133(6) to M/s Winsher Commercial Pvt. Ltd. dated 16.2.2016 by ITO Indore 1 2 Submission made in response to notice u/s 133(6) of the act dated 29.2.2016 alowng with annexures 2 A-1 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 3 A-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 69-88 C-3 Bank Statement from 09.10.2012 to 04.01.2013 89-90 D Regarding M/s Crest Vanijya Pvt. Ltd. 1 Submission made in response to notice u/s 133(6) of the act dated 23.2.2016 along with annexures 91 D-1 Income Tax return (ITR) acknowledgment for A.Y. 2012-13 2013-14 92-93 D-2 Audit Report for the F.Y. 2012-13 94-104 D-3 Loans advances (Group Summary) 105 D-4 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 106 D-5 Bank statement from 01.09.2012 to 05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G Regarding M/s Tropical Vyapar Pvt. Ltd. Submission made in response to notice u/s 133(6) of the act dated 24.2.2016 along with annexures 142 G-1 Income Tax return (ITR) acknowledgment for A.Y. 2012-13 2013-14 143-144 G-2 Audit Report for the F.Y. 2012-13 145-154 G-3 Loans advances (Group Summary) 155 G-3 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 156 G-5 Bank statement from 13.11.2012 to 20.11.2012 157 G-6 Copy of Postal Acknowledgment 158 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law . 36. Hon'ble Apex Court in the case of CIT vs. Green World Corporation 314 ITR 81(SC) has held that the Income-tax Officer, while passing an order of assessment performs a judicial function. A revision application lies before the Commissioner. It is trite that the jurisdiction exercised by the revisional authority pertains to his appellate jurisdiction. The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible . 37. In the light of the above judgments of Hon'ble Supreme Court and the facts narrated above, the view taken by the Ld. Pr. CIT that the Ld. AO has not conducted detailed enquiry does not hold good and thus cannot said to be a sound basis to invoke the provision of section 263 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction 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 had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and OM Prakash Badaya prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 39. In light of the above judgment of the Hon'ble Delhi High Court in the case of D.G. Housing Project Ltd. (supra), on perusal of the impugned order we find that at few places Ld. Pr. CIT had mentioned of having called for some information from the investigation wing at Kolkata other places but surprisingly before receiving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving knowledge about the Income Tax Act and Income Tax Rules. In the instant case we find that ld. AO has conducted adequate enquiry by calling requisite information in the form of ITR, Audit reports, bank statement and issuing notices u/s 133(6) of the Act to examine all the unsecured loans including parties referred by the Ld. Pr. CIT in the show cause notice u/s 263 of the Act. It is also stated by Ld. senior counsel for the assessee that most of the unsecured loans including the loan taken from alleged cash creditors have been repaid in subsequent year/years and the copy of ledger accounts stands filed in the paper book. The detail of paid up share capital, reserves surplus, balance sheet on 31.03.2012 and 31.03.2013 of the alleged 9 parties (referred by the ld. Pr. CIT in the impugned order) supports the fact that these parties are having sound financial position to give the loan to the assessee and the details are as follows:- Name of creditor As on 31.03.2012 Paid up share capital Reserve surplus Cash and bank balance Gliterdeal Mart Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vinimay Pvt. Ltd. 12,07,000 7,85,75,475 7,79,42,367 Gills Investment Ltd. 6,00,000 4,89,498 23,71,254 42. Further it is also appearing from records that out of the 9 parities in case of 8 cash creditors assessment u/s 143(3) of the Act have been completed in A.Y.2012-13 to 2014-15 and the revenue s authorities have not made any such addition for unexplained investment and unexplained cash credit in their hands. This fact has been accepted by the Ld. Pr. CIT also that in all cases there was a corresponding bank entry in the account of cash creditors out of which few were from the alleged parties also. For instance of M/s. Gliter Deal Mark Pvt. Ltd. gave unsecured loan of ₹ 75,00,000/- to assessee for which M/s. Gliter Deal Mark Pvt. Ltd. received sum of ₹ 55,00,000/- and ₹ 44,00,000/- from M/s Gielle Investment Pvt. Ltd. on 28.02.2013 and this fund was used to give loan to the assessee companies. So even the source of source has been mentioned and accepted by Ld. Pr. CIT in case of few cash creditors. 43. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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