TMI Blog2021 (10) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings appreciated the statement and impounded material in the backdrop of surrendered income and regular income. The order sheet entry dated 06.12.2018 is testimony to the examination and verification done by AO. Thus, in this way, there had been detailed examination and verification of investment in the house construction. Therefore, ld. PCIT was not justified in invoking the provisions of Section 263 of the Act on this issue. Difference in amount of closing stock as shown in balance sheet and audit report - While computing stock turnover, stock in trade means the average of opening and closing stock. In this way, the average of opening and closing stock comes to ₹ 4869765/- and the nature of two figures are different and hence not comparable. Thus, in view of the above explanation and the documents placed on record, the ld. PCIT was not justified in invoking provisions of Section 263 of the Act on this issue. Advance as given in cash to Sh. Naveen Mahipal in two installments and the source of the credit was not examined by the A.O - Since the assessee had borrowed funds for the investment in such non business activities therefore the interest claimed be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Gajanand Verma on 11.05.2015 amounting to ₹ 180000.00. Since, the current income didn't constitute the source of unsecured loan, therefore, the comparison of current income with the amount of unsecured loan does not have any meaning and relevance. It is a settled law that the assessee cannot be asked to explain whether the cash credit has suffered tax or not. IN this regard, we draw strength from the decision in the case of CIT Vs. Metachen [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] . Since the case of the assessee was not subjected to audit U/s 44AB of the Act, therefore, threw as no obligation upon her to deduct tax at source. Since the A.O. was aware of the turnover and facts of the case of the immediately preceeding year, thus, did not fasten the assessee with the obligation of tax deduction at source. Thus, in our view, the ld. PCIT was not right in invoking the provisions of Section 263 of the Act on this issue. Unexplained transactions as per documents found in search - A.O. during assessment proceedings, thoroughly examined and verified the statements recorded and the documents found during survey against the backdrop of the surrendered income and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee against the show cause issued U/s 263 of the Act and finally the ld. PCIT passed the order U/s 263 of the Act on the ground that the order U/s 143(3) of the Act dated 19/12/2018 passed by the A.O. is deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue and directed the A.O. to pass the speaking assessment order afresh after making proper enquiries and after affording adequate opportunity of being heard to the assessee. 3. Now the assessee is in appeal before the ITAT on the grounds mentioned above. 4. Both the grounds raised by the assessee in this appeal are interrelated and interconnected and mainly relates to challenging the order of the ld. PCIT passed U/s 263 of the Act. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. PCIT and also relied on the written submissions filed before the Bench and the same is reproduced below: A sum of rupees 60 lacs was surrendered on account of unaccounted Investments in house property. Against the surrendered income the assessee set off the business loss of ₹ 20.25 lacs. The PCIT directed to examine and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reference of matter to DVO by assessing officer for valuation is not mandatory. In that case appeal under section 263 was allowed. In view of the foregoing the PCIT does not acquire jurisdiction, hence his action is bad in law. Issue 2 It was alleged that at column number 40 of the audit report the amount of closing stock mentioned is ₹ 4869765/- whereas in the balance sheet it is ₹ 5020156/- .He called for due verification. Your kind attention is drawn to PN. 83 and PN. 84 of PB. PN. 83 contains column number 40 of 3cd and PN. 84, the first page of balance sheet. There is no mention of closing stock at column 40, whereas the first page of balance sheet contains the figure of closing stock . While computing stock turnover, stock in trade means the average of opening and closing stock . The average of opening and closing stock comes to ₹ 4869765/-.The nature of two figures are different hence not comparable. It is therefore requested that the present order of the Id. Pr. CIT may please be quashed as void ab initio and oblige. Issue 3 Advance of ₹ 25 Lac given in cash to Sh. Naveen Mahipal in two installments. The PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Proprietorship concern being carried on in the name of M/s Yogesh Enterprise. During the course of Assessment proceedings not only the Financial Statements of the current year but also of the last year were called upon and examined. Thereafter, a consolidated Financial Statement showing the Individual balance sheet and the balance sheet of Proprietorship concern on the standalone basis and aggregate basis was furnished.The name of Shri Virendra Agarwal figure in unsecured loan with outstanding balance of ₹ 832432/- . Thus the entire gamut of merging of Financial Statements was critically examined by AO. Since there was no receipt of fresh cash credit from Virendra Agarwal, his name cropped up in the consolidated balance sheet as on 31.03.2016 by virtue of transfer entry from Individual Balance Sheet to the consolidated/Merged Balance Sheet of the Proprietorship concern M/s Yogesh Enterprises. All the bank statements of the assessee are on record if there had been any receipt of Unsecured Loan from Virendra Agarwal then definitely it would have been shown therein. A statement containing the balance sheet of Smt. Sunita Agrawal and M/s Yogesh Enterprises as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unsecured loan of Rs, 5 lakhs Rekha Verma was the money received by her from Mr. Kripa Shankar Verma on 13.05.2015 amounting to ₹ 320000.00 through account payee cheque, and from Gajanand Verma on 11.05.2015 amounting to ₹ 180000.00. The current income didn't constitute the source of unsecured loan, hence the comparison of current income which the amount of unsecured loan does not have any meaning and relevance. It has been held that the assessee cannot be asked to explain whether the cash credit has suffered tax. CIT Vs. Metachem 245 1TR 160 The appellant didn't deduct the tax at source since the payee had furnished form 15G and the same was uploaded on the income tax portal on 28.04.2016. The prescribed due date was 30.04.2016.On the basis of such form the tax was not deducted at source in accordance with sec. 197 of the IT Act. Further the Chartered Accountant has given tax audit report in which he has reported the disallowance on account of non deduction of tax at source at nil. It is therefore sincerely requested that the order passed by the Id. Pr. CET is illegal and may kindly be quashed. Issue 6 A file containing 102 pages in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O. which is evident from the assessment order itself. In this regard, our attention was drawn to the office note/satisfaction note which says that: In this case during the survey proceedings the assessee surrendered additional income of ₹ 60 Lac although the assessee had shown business income of ₹ 6181145 in its computation. But the assessee claimed set off of loss pertaining to preceding year of ₹ 2025334/- thus net business income shown by the assessee in its computation of income was ₹ 4155811. Thus business loss claimed is allowed to the assessee. 9. Since, as per amendment in section 115 BBE, which prohibits the set off of any type of loss was inserted by Finance Act, 2016 and in this regard, it was held in the case of CIT (Mumbai) V Essar Technology Limited, the Hon ble Supreme Court has categorically mentioned that the wings of the government has been vested with plenary power to decorate whether an amendment to operate prospectively or retrospectively. Further in general observation the legislature considers any statute prima-facie to be prospective only unless the statute has been expressly by necessary implication made to operate ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/Point No. 3: the ld. PCIT noticed that an advance of ₹ 25 Lac was given in cash to Sh. Naveen Mahipal in two installments and the source of the credit was not examined by the A.O., thus, the PCIT directed the A.O. to examine and verify the source of credit by invoking provisions of Section 263 of the Act. 14. In this regard, after considering the documents placed on record and hearing the parties, our attention was drawn page No. 2 of assessment order (PB 118) which says that the assessee has advance in cash rupees 25 lakh in two installments. It further says that since the assessee had borrowed funds for the investment in such non business activities therefore the interest claimed be disallowed. In this regard, a very detailed and comprehensive and categorical findings was recorded by the A.O.. while doing so, the A.O. had called for Cash book vide query dated 5.11.2018 (PB 67). The same was produced and examined as is evident from the opening paragraph of the order of assessment. Further the reflection of such advance in the balance sheet as clear from the order of the PCIT is a sufficient and adequate proof regarding the nature and source of transaction. For the asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne basis and aggregate basis were also furnished wherein the name of Shri Virendra Agarwal figure in unsecured loan with outstanding balance of ₹ 832432/- . Thus, in this way, the entire gamut of merging of Financial Statements was critically examined by AO. Since there was no receipt of fresh cash credit from Virendra Agarwal, however, his name cropped up in the consolidated balance sheet as on 31.03.2016 by virtue of transfer entry from Individual Balance Sheet to the consolidated/Merged Balance Sheet of the Proprietorship concern M/s Yogesh Enterprises. All the bank statements of the assessee are on record and in case there had been any receipt of unsecured loan from Virendra Agarwal then definitely it would have been shown therein. Our attention was also drawn to the statement containing the balance sheet of Smt. Sunita Agrawal and M/s Yogesh Enterprises as well as consolidated as on 31.3.15 was furnished. Our attention was drawn to Page No. 2 of assessment order where it is written that the consolidated balance sheet of the assessee (individual) and M/s Yogesh Enterprises (proprietorship concern) that as on 1.4.2015 the opening capital was -811817. Therefore the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is obvious that the immediate source of unsecured loan of ₹ 5 lakhs from Rekha Verma was the money received by her from Mr. Kripa Shankar Verma on 13.05.2015 amounting to ₹ 320000.00 through account payee cheque and from Gajanand Verma on 11.05.2015 amounting to ₹ 180000.00. Since, the current income didn't constitute the source of unsecured loan, therefore, the comparison of current income with the amount of unsecured loan does not have any meaning and relevance. It is a settled law that the assessee cannot be asked to explain whether the cash credit has suffered tax or not. IN this regard, we draw strength from the decision in the case of CIT Vs. Metachen 245 ITR 160. Since the case of the assessee was not subjected to audit U/s 44AB of the Act, therefore, threw as no obligation upon her to deduct tax at source. Since the A.O. was aware of the turnover and facts of the case of the immediately preceeding year, thus, did not fasten the assessee with the obligation of tax deduction at source. Thus, in our view, the ld. PCIT was not right in invoking the provisions of Section 263 of the Act on this issue. 19. Issue/Point No. 6: It was observed by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners, i.e. the mother but the business did not come to an end as the other partners, viz., son who inherited the share of the mother continued with the business. In this situation, there was no question of selling the assets of the firm including stock-in-trade and therefore, it was not necessary to value stock-in-trade at market price. Thus, the view taken by AO in accepting the book value of the stock-in-trade was a plausible and permissible view and therefore, the CIT could not exercise his powers u/s 263. Even otherwise a bare perusal or bare reading of Section 263 of the Act, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of ITO/AO is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied or twin condition and in case if one of them is absent then recourse cannot be had to Section 263 of the Act and thus in this way the provisions cannot be invoked to correct each and every type of mistake or error committed by the A.O.. It is only when an order is erroneous then the Section will be attracted. Even the Coordinate bench of ITAT in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-of a citizen. [L Hirday Narain v. ITO [1970] 78 ITR 26 (SC). As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyone, when circumstances so justify or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that the order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovoke an inquiry. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real-life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279,], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had said that an auditor (read Assessing Officer in the present context) is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound. . Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld. Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld. Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. 22. Having said that, we may also add that while in a situation in which the necessary inquiries are not conducted or necessary verifications are not done, Commissioner may indeed have the powers to invoke his powers under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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