TMI Blog2023 (2) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer should have enquired into the transaction on the ground that the assessee had made repayment to bogus/shell companies, the assessee before us submitted that at the time when the aforesaid unsecured loans were received by the assessee from the above three parties, the receipts have already been taxed in the hands of the assessee u/s. 68 of the Act in the assessment for A.Y. 2013-14. The assessee had filed appeal against the aforesaid order and the appeal was finally closed under the Vivad Se Vishwas Scheme. Accordingly, once the unsecured loans have been taxed in the hands of the assessee at the time when they were received by the assessee in A.Y. 2013-14, the same cannot be again taxed in the hands of the assessee at the time when such loans are repaid back by the assessee to such alleged bogus companies, since the same would amount to double taxation. Further, on perusal of the order passed by ld. PCIT, it is seen that the ld. PCIT has not established as to how the repayment of loans falls u/s. 69C of the Act when the assessee has not claimed the same as expenditure and also when the source of such repayment has not been disputed by the PCIT. Scope of proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal. 3. The brief facts of the case are that the assessee filed return of income for assessment year 2017-18 declaring total income at ₹ Nil and the assessment under section 143(3) of the Act dated 31-12-2019 was finalised at an income of ₹ 41,27,020/-. The PCIT observed that the assessee had made repayment of unsecured loan of ₹ 21,83,802/- to bogus shell companies. The PCIT observed that the assessee failed to produce any verifiable evidence against repayment of unsecured loans of Rs. 21,83,802/- given to bogus shell companies. Therefore, the entire expenditure of Rs. 21,83,802/- was required to be treated as deemed income u/s. 69C of the Act and was required to be taxed u/s. 115BBE of the Act. The omission to do so resulted into under assessment of income of Rs. 21,83,802/-. Accordingly, PCIT initiated proceedings u/s. 263 of the Act against the assessee. 3.1 Before the PCIT, the contention of the assessee was that the query of the Assessing Officer was similar to what the ld. PCIT had raised in the revision proceedings. The observations of the Assessing Officer in the show cause notice issued during assessment proceedings was you are required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 263 of I.T. Act are that the order passed by the AO is erroneous and prejudicial to the interest of revenue. 4. The assessee is in appeal before us against the order passed by PCIT u/s. 263 of the Act. Before us, the counsel for the assessee primarily reiterated the submissions made before ld. PCIT during the 263 proceedings. In response, the Departmental Representative submitted that in the instant case, the assessee had made payments to shell companies and therefore the Assessing Officer was bound to enquire whether the payments made by the assessee to shell companies are genuine or not. Further, the ld. Departmental Representative relied on the case of Manoj Agrawala 113 ITD 377 (Delhi) SB to the effect that quoting of wrong section is not fatal to the order which has otherwise been passed correctly. 5. We have heard the rival contentions and perused the material on record. We observe that the aforesaid issue on the basis of which proceedings u/s 263 of the Act proceedings were initiated, was duly examined by the Assessing Officer at the time of assessment and specific show cause notice was issued to the assessee with respect to this issue proposing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not claimed the same as expenditure and also when the source of such repayment has not been disputed by the PCIT. 5.1 Regarding the scope of proceedings u/s 263 of the Act, an inquiry made by the Assessing Officer is considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law correctly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various High Courts in this regard. 5.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.) , made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15 . Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of lack of inquiry . 5.3 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom) , law on this aspect was discussed in the following manner (page 113) The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court holding that where assessee-company had received unsecured loans from two different companies and Assessing Officer had made inquires in detail and accepted genuineness of same, such view of Assessing Officer being a plausible view could not be considered erroneous or prejudicial to interest of revenue. The facts of this case were that respondent assessee has filed its return of income showing total income of Rs. 62,55,900/- which was assessed under section 143(3) of the Act, 1961 by an assessment order dated 14th March 2016. The respondent company received unsecured loans from M/s. Georgett Tradecom Pvt Ltd and M/s. Purba Agro Food Pvt Ltd amounting to Rs. 2.49 Crore and the Assessing Officer allowed these unsecured loans. The Principal Commissioner of Income-tax invoked section 263 of the Act, 1961 for revising the assessed income of the respondent assessee. It was noticed by the PCIT that the unsecured loans obtained by the respondent assessee are shown as investment in the name of the assessee in the share application as well as in the balance sheet of the respective companies. The PCIT passed an order under section 263 of the Act directing the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed 5.7 The Supreme Court in the recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC) , dismissed the Revenue s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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