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TMI Blog2022 (6) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 unsecured loans in the return of income; (iii)Failure of the appellant to furnish proof of source of investment in the fixed assets in new venture by the appellant; (iv)Non- verification of the source of cash investment of Rs 34,00,000/- by a partner. 2. The appellant submitted detailed reply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 introduced vide letter dated 06.12.2018 (PB 135-136). These very evidences were produced by the partner in compliance of the above notice. From the above enquiry conducted by the AO on the pertinent issue of investment by the partner, it is therefore not tenable for the Ld Pr CIT to make out present case as case of no enquiry. It is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 350 ITR 358 (All) v. Kesharwani Sheetalaya Sahsaon vs CIT ITA No. 17 of 2007 dt: 24.04.2020 (All) vi. CIT vs. Md. Perwez Ahmad & Ors [2004] 268 ITR 381 (Patna) vii. CIT vs. Metal & Metals of India (ll)TMI 630 (P&H) If detailed inquires made by AO. revision u/s 263 not sustainable If an order is passed after making inquiry on an issue and after h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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 ABIPC1790L Opening balance Rs 5,00,000/- and fresh addition Rs 33,00,000/- (Father of one of the partner) The objection of the Ld RA is that there had been cash deposit before advancement of loan to the appellant. The Ld RA was not convinced with the creditworthiness of the creditor here. In this connection, it may kindly be noted that source of cash deposited again is the cash sale in the liquor business of the said cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 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 under appeal. The source of investment in the fixed assets had not been furnished by the assessee with supporting documentary evidences. The appellant during the revision proceedings before the Ld Pr CIT explained that during assessment proceedings the complete bank statement was provided to the Ld AO and the schedule of fixed assets are part of the assessment records where the claim of depreciation is also supported with the Tax Audit report. The appellant before the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t) 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 override the substantive provision of section 263(1). * Crompton Greaves Limited v. CIT [2016] 46 ITR(T) 465 (Mumbai - Trib.) It is the Commissioner's responsibility to demonstrate that the enquiries or verification conducted by the TOs were not in accordance with the enquiries or verification that would have been carried out by a prudent officer. * Mumbai ITAT in the case of Shri Narayan Tatu Rane vs. ITO - ITA No. I.T.A. No. 2690/Mu m/2016 [6 May 201 6] * Delhi ITAT has occasioned to discuss t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on this ground. 6. Further drawing our attention towards judgment of Hon'ble Supreme Court in the case of Greenworld Corporation, 181 Taxman 111 (SC) and other decisions, ld. AR submitted that lack of inquiry/no inquiry is quite distinct and different from the inadequate inquiry and in case of no enquiry by the Assessing Officer, ld. PCIT can exercise jurisdiction u/s. 263 of the Act and not in a case where the Assessing Officer has made sufficient enquiries which seems appropriate in the facts and circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 263 of the Act. Ld. AR lastly submitted that merely because from perfectionist points of view, it is felt that some more enquiries and verifications could have been made by the Assessing Officer, the assessment order cannot be declared to be erroneous and prejudicial to the interests of revenue as per judgment of Special Bench of Tribunal in the case of Salora International Ltd. vs. Addl. CIT (supra). He also submitted that Explanation 2 (a) to section 263 of the Act cannot override sub-sec. (1) of this section. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 called information directly from Shri Saurabh Goyal by invoking provisions of section 133(6) (assessee's paper Book 134) and in reply to said notice, partner Shri Saurabh Goyal vide letter dated 06.12.2018 (assessee' paper book page 135 - 136) submitted all the relevant details before the Assessing Officer substantiating the source of capital introduced in assessee-firm. Therefore, in our considered opinion, the Assessing Officer has made sufficient enquiry on the issue of capital introduced by the partner during the relevant year. We m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income of Rs.48.78 lacs which is higher to the fresh loan given to the assessee firm. Therefore, we are unable to see any ambiguity, perversity or any valid reason to disturb the view taken by the Assessing Officer and accepting the unsecured loan creditors as shown by the assessee. Therefore, we feel satisfied that the Assessing Officer has made sufficient enquiry on the issue on unsecured loan creditors and thereafter allowed the claim of assessee regarding unsecured loans shown in the balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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