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TMI Blog2021 (8) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the sufficient inquiries were not made to ascertain the genuineness and credit worthiness of the loan creditors in respect of unsecured loan undertaken by the Assessee in the Assessment Year 2013-14. 4.That there is a distinction between "lack of enquiry" and "inadequate enquiry". In the present case the Assessing Officer collected necessary details, examined the same and then framed the assessment u/s. 143(3) of the Act. Since the Assessing Officer had investigated/ examined the issue and applied his mind towards the whole record made available by the assessee and collected by the AO u/s 133(6) during assessment proceedings and uncontrovertedly, necessary details/reply to the questionnaire were filed/produced by the assessee and the same were examined by the Assessing Officer, therefore, the present case is not a case of lack of enquiry by the Assessing Officer and thus section 263 cannot be invoked by the Pro CIT. 5.That Explanation 2 to S. 263 inserted w.e.f. 01.06.2015 does not override the law as interpreted by the various High Courts whereby it is held that the CIT cannot treat the AO's order as being erroneous and prejudicial to the interest of revenue wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t records and documents filed by the assessee and notice that the assessment order is prima facie, erroneous and prejudicial to the interest of the revenue and accordingly issued following show cause notice dated 18.01.2018 to the assessee u/s 263 of the Act: F. No.Pr. CIT-2/IndITech/263117-l8 Date 18.01.2018 To, M/S RADHISHWARI DEVELOPERS PVT. LTD., F/H-198, SCHEME NO. 54, VIJAY NAGAR, INDORE Sub:- Show cause notice Ills 263 of the Income Tax Act, 1961, in the case of M/s Radhishwari Developers Pvt. CLtd., F/H-198, Scheme No. 54, Vijay Nagar, Indorc for A.V. 2013-14 PAN: AAFCR1916A_ reg. Please refer to the assessment order dated 07/03/2016 for A. Y. 2013- 14 in your case. On perusal of case record in your case for the A. Y. 2013-14 it is found that you have furnished your return of income declaring total Loss at Rs. 50,19.5031- on 27.09.2013. Assessment in y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive entries. Therefore looking to the circumstances surrounding the transactions, the A.O. should have made inquiries regarding the creditworthiness of the lender company and also the source of such a huge amounts in the hands of the lender company. 5. On perusal of records it is also noticed that the assessee has received unsecured loans worth Rs. 21.85 Crores from various parties which includes some other Kolkata based companies who have entered into transactions for loan with the assessee on almost identical method discussed above. The details of loans from such companies are given here under:- SI.No. Name of the Company Amount received 1. M/s Apanapan Mercantile Pvt. Ltd. Rs. 33,00,000/- 2. M/s Bhimthal Nirman Pvt. Ltd. Rs. 25,00,000/- 3. M/s Confident Vinimay Pvt. Ltd. Rs. 65,00,000/- 4. M/s Crest Vanijya Pvt. Ltd. Rs. 31,00,000/- 5. M/s GieIle Investment Pvt. Ltd. Rs. 51,00,000/- 6. M/s Tropical Vyapar Pvt. Ltd. Rs. 28,00,000/- 7. M/s Winsher Commercial Pvt. Ltd. Rs. 89,00,000/- Total Rs. 3,22,00,000/- 6. All the afore-said huge loans are from Kolkata based companies who have given these unsecured loans to the assessee without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice by Ld. Pr. CIT was audit objection raised by the audit party. It was also submitted that all the information asked by the ld. Assessing Officer were duly replied and requisite information was received from the following cash creditors to whom notice u/s 133(6) of the Act was issued:- A M/s. Apanapan Mercantile Pvt. Ltd. B M/s. Bhimthal Nirman Pvt. Ltd. C M/s. Confident Vinimay Pvt.Ltd. D M/s.Crest Vanijya Pvt. Ltd. E M/s. Gielle Investment Pvt. Ltd. F M/s. Tropical Vyapar Pvt. Ltd. G M/s. Winsher Commercial Pvt. Ltd. H Glitter Dealmark P. Ltd. I Jayant Securities & Finance Ltd. 5. It was also submitted that all documentary evidences which could satisfy the identity of the cash creditors, genuineness of the loan transactions and the creditworthiness of the cash creditors were filed before the Ld. Assessing Officer and independent enquiry was also conducted by the Ld.AO calling 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 deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the depositors was proper. It was incumbent upon the AO to have verify everything properly by making necessary investigation and verification before accepting the deposits as correct. The records shows that the AO issued a questionnaire to the assessee on 12.01.2016 and the assessee is asked to submit information about unsecured loans taken during previous year given complete detail thereof. The assessee is also asked to prove the identity of the subscribed, genuineness of the transaction and creditworthiness of the subscribers also. The assessee vive reply dated 08.02.2016 submitted certain information which included confirmation of 21 depositors. The balance sheet, bank statement acknowledgement and computation of income of these depositors were also filed thereafter it appears that AO has issued 133(6) notice to the depositors and certain replies from the depositors are on record which have been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained the information and did not make any effort to investigate further. Therefore, this type of action is a case of no enquiry at all. Further, as mentioned above the letter issued to Jayant Security and Finance Ltd. was received back unserved with the remark not known/left and someone filed the information before the AO. In the circumstances it is a clear case for suspicion for the AO and he should have made further enquiries about the existence of the company as in this case the confirmation was dated 1st April 2013 whereas the query was raised in the year 2016. It appears that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been informed by the Addl. DIT, Investigation, Kolkata That Winsher Commercial and Tropical Vyapar P. Ltd. were found involved in bogus LTCG transactions. Further, the database available with this office also should that Vishvjyoti Trading Ltd. was also involved in bogus LTCG transactions. These set of facts clearly indicates that there is a clear need to investigate the transactions from the bank account to ascertain the genuineness of the transaction and creditworthiness of the depositor companies. I have also written a letter to Investigation Directorate, Kolkata for 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 jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In this connection letters for conducting enquiry have also been issued to Pr. DIT (Investigation), Bhopal, Ahmedabad and Nagpur. The above discussion clearly shows that the assessment order being erroneous in so far as it is prejudicial to the interest of revenue as per the provision of section 263 and explanation 2 to the section. The AO completed the assessment without making necessary investigation and enquiries which were necessary to arrive at the correct taxable income of the assessee. He didn't examine the creditors from 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision 263 therefore, the views taken by the AO cannot supersede the view taken by the superior authority i.e. Pr. Commissioner exercising its judicial powers as per the provisions of the Act. The assessee has pointed out that the invocation of 263 proceedings without making require enquiries/investigation. The objection is not acceptable as there were several indicators and evidences available on record which shows that the assessing officer has not make any sufficient enquiries 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 judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m's length the shares of a private limited company, hardly having any worth, with face value of Rs. 10 at a premium of Rs. 190. This mere fact should have been cornerstone for the Assessing Officer to embark upon further enquiry to unearth the truth. The genuineness of transactions of issue of share at such hefty premium in this background of the matter was under dark cloud and it skipped the attention of 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe of the term 'enquiry' can be diverse in different circumstances. There cannot be straitjackket formula to positively conclude as to conducting or nonconducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just oridinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored this aspect of the assessment to the file of the Assessing Officer for making a proper enquiry and then deciding . [Para 20.g] Q. If the Assessing Officer has taken a possible view, can still the revision be ordered ? A. Where the Assessing Officer fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recourse cannot be had to section 263(1) - Held, yes- Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue held, yes. An incorrect assumption of facts or an incorrect application of law will 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO during the assessment proceedings He is directed to get complete investigation done about various unsecured loans taken by the assessee company. He is directed to also verify the entries in the bank account, nature of business of 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection 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 forwarded wherein audit objection was not accepted for the reason that there was no evidence on record which was not considered by the then Assessing Officer while accepting cash creditors as proper. It is further submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision 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 conducting detailed enquiry on various issues including unsecured loans taken/availed by the assessee company. The assessment order is passed after due application of mind, therefore the impugned notice u/s 263 of the challenging that proper and adequate enquiry was not made, renderin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preted 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 behind the explanation could not have been so as the same would lead to unending litigation and no finality in the legal proceedings. Accordingly, in view of our detailed discussion, we allow the grounds of appeal raised by the assessee. In such circumstances, the words without making enquiries/verification which should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/s 133(6) of the Act to the loan creditor companies, which were duly served at the addresses furnished by the assessee. This proves the identities of the loan creditor companies. Further, in response to the said notice u/s 133(6), loan creditor companies have furnished their replies confirming the transactions with the assessee company. The loan creditor compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nature of the subject transactions. This, under such circumstances the order passed by the learned Assessing Officer u/s 143(3) cannot be said as prejudicial to the interest of the revenue and thus, needs to be quashed. Without prejudice further, to the above it is submitted that the recourse to section 263(1) can be taken as twin conditions viz order must be erroneous as well as prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 8,28,82,924/- and as on 31.03.2013 was at Rs. 8,28,88,407/-. Revenue from operations of these two years were at Rs. 15,29,013/- and Rs. 65,84,827/- respectively. This, objection raised by the audit team on creditworthiness of said tender is factually incorrect. That perusal of their Balance Sheet also, reveals that there is no increase in share capital and/or loans during the year in question and considering the fact that the lender company is having substantial funds, to make advance to Assessee Company. The availability of funds with loan Creditor Company was assessed u/s 143(3) for the assessment year in question (copy enclosed). This, It is a matter of quest work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities 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 channels. Copies of accounts of aforesaid creditors and enclosed herewith. In view of legal as well as factural position discussed hereinabove it is __red beyond doubt that there was no lack of inquiry in the case of assessee company and thus, show-cause notice so issued u/s 263 is void ab-initio and ------ it is prayed that the proceedings so initiated u/s 263 may kindly be dropped and oblige. 8. Ld. Counsel for the assessee also submitted that in the show cause notice issued u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cash credits during the year which are in the nature of share application money, share capital, share premium or any such amount by whatever name. Specifically it does not talk about the unsecured loans where as in the instant appeal the assessee have merely received unsecured loan from some companies for business purpose of which source of source is through banking channel and the same has been repaid in the subsequent years after paying regular interest and deducting tax at source on the same. 12. Ld. Senior counsel for the assessee also submitted that the case law of CIT vs. Amitabh Bachchan (2016) 384 ITR 200 (SC) relied on by the Ld. Pr. CIT in the impugned order u/s 263 of the Act is distinguishable, as the facts in this case are that the assessee had filed revised return claiming additional expenses. When the Ld. Assessing Officer enquired about these additional expenses the assessee withdrew this claim and the Ld. Assessing Officer accepted the same and did not make any further enquiry. Thus, in this case the enquiry which was to be conducted was abated by the Ld. Assessing Officer, whereas in the present case detailed enquiry have been conducted by the Ld. Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 Commissioner of Income Tax-XIII v Ashish Rajpal [(2009) 180 Taxman 623 (Delhi)] 130-140 15. Per contra Ld. Departmental Representative (DR) vehemently argued supporting the detailed finding of Ld. Pr. CIT and various judgments and decisions referred therein which already stands reproduced in the preceding paras. Vide letter dated 25.05.2021 Ld. DR furnish enquiry report in the case of assessee which are dated 06.11.2018 issued by DIT(investigation) Kolkata. 16. We have heard rival contentions and perused the records placed before us and carefully gone through the various paper book & judgments referred and relied by the assessee. Though the assessee has raises six grounds of appeal but the sole grievance is challenging the order of Ld. Pr. CIT wrongly invoking the provision of section 263 of the Act holding the order u/s 143(3) of the Act dated 07.03.2016 as erroneous and prejudicial to the interest of revenue and further directing the Ld. AO to reexamine all the unsecured loans taken by the company during F.Y. 20120-13. 17. We observe that the assessee is a builder and developer. Loss was declared in the e-return of income filed u/s 139(1) of the Act. Case selected for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.--For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a showcause notice pointing out the reasons for the formation of his belief that action under section 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the fourth compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. 21. It is well settled law that for invoking the provisions of section 263 of the Act both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon'ble Courts. 22. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of H.H. Maharaja Raja Power Dewas (1983) 15 Taxman 363 in para 10 of this order held that "However, the first argument, viz., that an assessment order without compliance with the procedure laid down in section 144B is erroneous but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n - As purchaser could not pay installments as scheduled in agreement, extension of time for payment of installments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified - Held, yes 24. Hon'ble Gujarat High Court in the case of Smt. Minalben S. Parikh - [1995] 215 ITR 81 - order pronounced on 17.10.1994 - Para 12 - "From the aforesaid, it can well be said that the wellsettled principle in considering the question as to whether an order is prejudicial to the interests of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was absent, the Commissioner cannot exercise the suomoto power of revision under section 263." [emphasis supplied] 26. At this stage, before considering the multi-fold contentions of the learned representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the Commissioner of Income-tax taken under section 263. The Income-tax Appellate Tribunal in the case of Mrs. Khaiiza S. Oomerbhoy v. ITO [2006] 101 TIJ 1095 (Mum), analysed in detail various authoritative pronouncements including the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and has propounded the following broader principle to judge the action of the Commissioner of Income-tax taken under section 263. (i) The Commissioner of Income-tax must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 M/s. Bhimthal Nirman Pvt. Ltd. Rs. 25,00,000/- 3 M/s. Confident Vinimay Pvt.Ltd. Rs. 65,00,000/- 4 M/s.Crest Vanijya Pvt. Ltd. Rs. 31,00,000/- 5 M/s. Gielle Investment Pvt. Ltd. Rs. 51,00,000/- 6 M/s. Tropical Vyapar Pvt. Ltd. Rs. 28,00,000/- 7 M/s. Winsher Commercial Pvt. Ltd. Rs. 89,00,000/- 8 M/s. Jayant Securities and Finance Ltd. Rs. 1,85,50,000/- 9 M/s. Gliter Deal Mart Pvt. Ltd. Rs. 75,00,,000/- Total Rs. 5,82,50,000/- 28. Observation 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 Rs. 21.07 cr. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n against your as per law. 17. Please give the details of the income in the share capital or share application money with the names, complete postal addresses of the subscribers and the mode of receipt of money with details. Please furnish the confirmation of such share capital with the PAN of such subscribers. You are kindly requested to prove the identity of the subscribers, the genuineness of the transactions and the credit worthiness of the subscribers 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. mortgag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commercial Pvt. Ltd. (one of the cash creditor mentioned in the show cause notice issued by Ld. Pr. CIT) is reproduced below: 33. Same type of notices were also issued to other companies which are mentioned in the show cause notice issued u/s 263 of the Act (paper book No.3 dated 23.01.2019) and all 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 Details of Mode of Transaction 4 A-3 Bank statement from 01.09.2012 to 30.11.2012 5-7 A-4 Auditors Report and balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E-5 Bank statement from 01.07.2012 to 11.12.2012 124 E-6 Copy of Postal Acknowledgment 125 F Regarding M/s. Gliter Dealmark Pvt. Ltd. 126 1 Submission made in response to notice u/s 133(6) of the act dated 23.2.2016 along with annexures 127-128 F-1 Income Tax return (ITR) acknowledgment for A.Y. 2012-13 & 2013-14 129-138 F-2 Audit Report for the F.Y. 2012-13 139 F-3 Loans & advances (Group Summary) 140 F-4 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 F-5 Bank statement from 10.07.2012 to 04.03.2013 141 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined and verified the said transaction himself and given a finding on merits. 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of the Income Tax Department and known to be having 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. 32,42,400 7,96,46,007 4,91,586 Apnapan Mercantile Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct were completed in case of this company. Observation of the Ld. Pr. CIT about letter issued to M/s. Jayant Security & Finance Limited received back unsecured and then stating that somebody filed information on behalf of the M/s. Jayant Security & Finance Ltd. does not find any merit as this company is regularly filing appeal before the judicial forums including Tribunal at Ahmedabad Benches and before Hon'ble High Court of Gujarat, copy of which is placed at paper book No.4 of page 10 to 23 which shows that this company is not a dummy company. 44. We, therefore, under the given facts and circumstances of the case, find that detailed information was called for by the Ld. AO, specific reply submitted to each of such query by the assessee, independent enquiry conducted by the Ld. AO by issuance of notice u/s 133(6) of the Act and are satisfied that the ld. AO has conducted adequate and detailed enquiry to investigate and examine all the unsecured loan taken during the year including the loan taken from cash creditors named in the show cause notice issued u/s 263 of the Act and find that the Ld. AO has taken one of the permissible view in law by verifying the identity of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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