TMI Blog2022 (6) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... us lay on the assessee firm regarding capital introduced by the partners is discharged and the Assessing Officer was quite correct and justified in accepting the explanation of the assessee in this regard. Therefore, we are compelled to hold that the Assessing Officer has made sufficient enquiries on this issue and therefore, ld. PCIT was not correct in holding the assessment order as erroneous and prejudicial to the interests of revenue on this count. Unsecured loan creditors - As there was no iota of doubt regarding identity and creditworthiness of this loan creditor and the Assessing Officer was right in not pointing out any doubt. Regarding another loan creditor Smt. Manju Goyal, who is mother of one of the partners, it is discernible that she is also earning income from liquor business having turnover of Rs.3.84 crores and gave loan to the assessee firm only of Rs.5 lacs, which is less than her returned income. Similar case is of third loan creditor Smt. Sarika Goyal, who is wife of one of the partners and gave loan of Rs.45,25,000/- to the assessee firm. Smt. Sarika Goyal is also earning income from liquor business having turnover of Rs.26.89 crores and returned incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of any minimal inquiry conducted by P. CIT to support his finding that the order under revision is prejudicial to the interest of revenue and erroneous. 2. We have heard the arguments of both the sides and perused the material available on record including paper book spreading over 268 pages, case laws paper book and written synopsis/arguments of the appellant/assessee. 3. Learned assessee s Authorised Representative (AR) briefly reiterated the written synopsis, which is being reproduced below for the sake of completeness of this order : MAY YOUR HONOUR PLEASE BE 1. The order under revision was passed by the ITO Ward 5(1) (5) Noida on 17.12.2018 u/s 143(3) on the returned loss of Rs 2,90,850/-. The Ld Pr CIT assumed revisionary jurisdiction u/s 263 of the Act and issued a show cause notice (SCN) dated 25.01.2021 (PB 144-146) requiring the appellant to show cause as to why the assessment be not set aside being erroneous and prejudicial to the interest of revenue based on the discrepancies identified in the SCN. The discrepancies identified in the SCN are as under; (i). Non initiation of penalty proceedings u/s 271B; (ii).Improper disclosure of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by the partner has not been verified in the original assessment is far from correct. In fact, the AO vide notice u/s 142(1) dated 08.10.2018 in item No 3 (PB 59) required the appellant assessee to furnish complete capital account as per books, complete details of capita introduced i.e. dates and mode of payment also to prove source thereof with documentary evidence. In reply thereto, the appellant vide letter dated 29.11.2018 (PB100) explained the source of investment of the partner in question and further vide letter dated 12.12.2018(PB105) supported the source of cash with the explanation that the sales of the liquor business being Rs 42 Crore and detailed source of investment by said partner. The source of cash investment of Rs 34,00,000/- was also explained specifically at page 106 and the same was supported with statement of affairs of Saurabh Goyal as on 31.03.2016(PB 107), cash book (PB 108-110), and the audited balance sheet of the liquor business for AY 2016-17 (PB 111-125) and Bank statement (PB 126-133). The Ld AO called information directly from the partner u/s 133(6) of the Act on 03.12.2018 (PB 134) and in reply the said partner explained the source of capital int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if the source of funds in the hands of the partner are not satisfactorily explained. The identical issue came to be considered in CIT v Taj Borewells [2007] 291 ITR 232 (Mad), where the Court taking note of the fact that Section 68 is a charging section and also a deeming provision, it was held that once the firm had offered explanation and established that the capital was contributed by the partners, the same could not be assessable in the hands of the firm. Once the firm had offered an explanation and established that the capital was contributed by the partners, the same could not be assessable in the hands of firm. Unless there are contradictions or in consistencies in the statement of the partners, the credit cannot be treated as unexplained and cannot be added under section 68 of the Act in the hands of the assessee firm. To support the above proposition reliance is placed on the following authorities including the jurisdictional Allahabad High Court: i. CIT Vs Jaiswal Motor Finance 141 ITR 706 (All) ii.CIT Vs Metachem Industries 245 ITR 160 (MP) iii. CIT Vs Burma Electro Corporation 252 ITR 344 (P H) iv. Abhyudaya Pharmaceuticals Vs CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) upheld Tribunal s order accepting the contention of the assessee that AO had made detailed enquiries while allowing claim for deduction of business expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court s order dismissed. When the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. . CIT v. Max India Limited [2007] 295 ITR 282 (SC) Malbar Industries Co Ltd v. CIT [2000] 243 ITR 83 (SC) PCIT vs. V. Dhana Reddy Co. - [2018] 100 taxmann.com 358 (SC) CIT vs. International Society For Krishna Consciousness - [2020] 117 taxmann.com 799 (SC) b. Unsecured loans failure of the AO to examine the credit worthiness of the loan creditors. A chart of fresh unsecured loans is at page 7 of the impugned order from which it can be noted that following fresh loans have been accepted by the appellant; I. Sh Lokesh Chand PAN A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Turnover Rs.3.84 Crore and current income Rs.7.38 lakh) III. Smt Sarika Goyal PAN: AGMPG4438J Fresh Loan Rs.45,25,000/-(Wife of one of the partner) The facts and back ground of the case is identical to that of Sh Lokesh Chand and Smt Manju Goyal. She is engaged in liquor business licenses at 12 locations in Uttar Pradesh showing source of cash deposit from that business. The relevant evidences are on records: Confirmation of loan PB 89 Copy of ITR PB 90 Copy of bank statement PB 91-95 Copy of liquor licenses at Pages 226-231, 233-238 Audited accounts with tax audit report, computation of income and ITRV Document No.15 (Turnover Rs.26.89 Crore and Current income Rs.48.78 Lakh) c. Addition to the fixed assets This objection of Ld Pr CIT does not survive as in consequential order passed by the AO u/s 143(3)/263/l 44B dt: 31.03.2022, the AO did not make any addition/disallowance. Without prejudice to above, the Ld Pr CIT found that there had been addition to the fixed assets for Rs. 5,08,18,048/- during the year in different items of fixed assets. And also, a claim of depreciation Rs 38,66,339/- para iii of page 2 of the order und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is of proper enquires , the burden is on CIT to conduct further enquires by himself and he cannot simply set aside the order of the AO for further enquiries. For the above proposition reliance is placed on the following decisions: - o CIT Vs DG Housing 343 ITR 239(Del); o CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), o PCIT v. Delhi Airport Metro Express Pvt. Ltd. [ITA No. 705/2017] ; o Pr CIT vs. Mera Baba Reality Associates Pvt Ltd (Delhi High Court) ITA No.637, 507, 508, 509/2017 Dated: 21.08.2017; o BSES Rajdhani Power Ltd vs. Pr CIT ITA No.387/2017 (Del); o PCIT v. Modicare Limited [ITA No. 759/2017] (Del); o DIT v. Jyoti Foundation [357 ITR 388] (Del); Applicability of Explanation 2(a) to section 263 Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by the AO, assessment order cannot be declared to be erroneous and prejudicial to the interests of revenue. This view is taken by the Delhi Tribunal Special Bench in the case of Salora International Ltd. v. Addl. CIT [2005] 2 SOT 705 (Delhi) (Trib.)]. Moreover, the Explanation cannot overri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyal. Therefore, ld. PCIT was not correct in alleging that there was no enquiry by the Assessing Officer on this issue. Pressing into service the proposition rendered by Hon ble jurisdictional High Court of Allahabad in the case of M/s. Kesharwani Sheetalaya Sahsoon vs. CIT, ITA No. 17 of 2007 dated 24.04.2020, ld. AR submitted that when the assessee firm had discharged its onus by proving three things, i.e., identity of the partner, his creditworthiness and genuineness of the transaction through banking channel, then onus is deemed to be discharged. Therefore, it is open for the Assessing Officer to take any action against the contributing partners for any enquiry and no addition can be made in the hands of the assessee. He further submitted that the assessee firm discharged its onus by submitting all the relevant and possible details of contributing partner Shri Saurabh Goel in the form of copy of ledger account, copy of ITR for A.Y. 2016-17, source of capital introduced, his name and address, then the onus lay on the shoulders of the assessee firm is discharged. Therefore, ld. PCIT was wrong in alleging the assessment order as erroneous and prejudicial to the interest of Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment as erroneous and prejudicial to the interest of Revenue. 8. On the third issue, learned AR further submitted that in the assessment order passed by the Assessing Officer vide dated 31.03.2022, the Assessing Officer has not made any addition on account of addition to the fixed assets by the assessee firm. Therefore, the objection of ld. PCIT does not survive to allege the previous assessment order as erroneous and prejudicial to the interest of Revenue. 9. Ld. AR pressing into service various judgments and decisions including the judgment of Hon ble Delhi High Court in the case of CIT vs. DG Housing (supra), CIT vs. Sunbeam Auto Ltd. (supra) and recent judgment in the case of PCIT vs. Delhi Airport Metro Express Pvt. Ltd. (supra), submitted that in a case where ld. PCIT alleges that the Assessing Officer has not made sufficient or proper inquiry, he is duty bound to make inquiry himself to hold that the impugned assessment order is erroneous and prejudicial to the interest of revenue. Without making any inquiry himself and only directing the Assessing Officer to redo the assessment or to make further enquiries is not correct, valid and sustainable as per mandate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 263 of the Act. 12. On careful consideration of the rival submissions, we are of the considered view that the ld. AR has specifically demonstrated that the Assessing Officer has made enquiries on the issue of capital introduced by the partner Shri Saurabh Goyal amounting to Rs.1.38 crores, out of which 1.04 crores were received by the assessee through banking channel and Rs.34,00,000/- in cash. From the notice issued by the Assessing Officer u/s. 142(1) dated 08.10.2018, question No. 3 there under (assessee s paper book page 59 to 60), it is amply clear that the Assessing Officer asked the assessee to file all the details relating to capital introduction by the partners. Further from the replies of the assessee vide dated 29.11.2018 and 12.12.2018, it is clear that the assessee submitted statement of affairs, cash book and audited balance sheet of the liquor business for A.Y. 2016-17, bank statements and ITRs of contributing partner Shri Saurabh Goyal, which clearly reveal that the assessee firm has demonstrated that Shri Saurabh Goyal has introduced capital in the firm and he submitted all the relevant details regarding such contributing partner. The Assessing Officer also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings on the issue of unsecured loan creditors. We may also point out that if we logically value the reply filed by the assessee we find that the creditor Lokesh Chand is father of one of the partners and opening balance was Rs.5,00,000/- and fresh addition was Rs.33,00,000/-. Copy of its audited books of account were placed before the authorities below which reveal that the sale of liquor business is in cash and turnover was Rs.8.26 crores having income of Rs.18.33 lacs and loan was also shown in the balance sheet. Therefore, there was no iota of doubt regarding identity and creditworthiness of this loan creditor and the Assessing Officer was right in not pointing out any doubt. Regarding another loan creditor Smt. Manju Goyal, who is mother of one of the partners, it is discernible that she is also earning income from liquor business having turnover of Rs.3.84 crores and gave loan to the assessee firm only of Rs.5 lacs, which is less than her returned income. Similar case is of third loan creditor Smt. Sarika Goyal, who is wife of one of the partners and gave loan of Rs.45,25,000/- to the assessee firm. Smt. Sarika Goyal is also earning income from liquor business having tu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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