TMI Blog2023 (3) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... lack of investigation . PCIT has not brought any material on record to show that the view taken is contrary to law or the investigation is erroneous. Decided in favour of assessee. - I.T.A. No.117/Asr/2022 - - - Dated:- 11-11-2022 - DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : Sh. Rahit Kapoor, CA and Sh. V.S. Aggarwal. For the Respondent : Sh. Rohit Mehra, CIT.DR ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee is directed against the order of the ld. Pr. Commissioner of Income Tax -1, Jalandhar, [in brevity the PCIT] bearing appeal No.DIN Order No.ITBA/REV/F/Rev5/2021-22/1042161981(1), date of order 30.03.2022, the order passed u/s 263 of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2017-18.The impugned order was emanated from the order of the ld. Dy. Commissioner of Income Tax, Circle, Hoshiarpur, (in brevity the AO) order passed u/s 143(3) of the Act date of order 24.12.2019. The assessee has raised the following grounds: 1. That on the facts and in the circumstances of the case and in law, Ld. Principal Commissioner of Income Tax (CIT) erred in passing orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made by the partners in the firm has already been examined during assessment proceedings framed u/s 143(3) of respective partners. Therefore, the assessment framed u/s 143(3) by the AO is neither prejudicial to interest of revenue nor erroneous. 7. That on the facts and in the circumstances of the case and in law, Ld, PCIT erred in directing the AO to inquire into the identity, genuineness and creditworthiness of Unsecured loans ignoring the fact that necessary details in this regard has already been submitted before AO during assessment proceedings and examined by Ld. AO. Thus, appellant prays the direction of CIT is bad in law. 8. That the order u/s 263 by the Ld. PCIT is illegal, bad in law and without jurisdiction as the Ld. PCIT has failed to consider the replies furnished by the assessee before passing the order u/s 263. That the PCIT has failed to consider the submissions of the assessee regarding the unsecured loans raised by the assessee. The PCIT has ignored that the assessee firm has duly discharged its onus by submitting Income tax returns, bank statements and confirmations in respect of unsecured loans in reply to notice u/s 263. That the PCIT has faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the paper book with brief note which are kept in the record. The observation of the ld. PCIT in para no. 3 and 4 of order U/s 263is extracted as below: 3. In response to the show cause notices, the assessee filed reply reiterating the submissions made during assessment. Copies of the two replies and of the ledger accounts of creditors, etc. as filed during assessment proceedings were again filed. It was stated that assessments in the case of partners have been framed u/s 143(3) of the Act and investments made by them including their investment in the assessee firm had been examined in their individual cases by their respective AOs. 4. I have considered the reply of the assessee to the SCN u/s 263 of the Act and the assessment records. (I). The case was selected under CASS for complete scrutiny on the following issues: i. Large Squared up Loans during the year ii. Mismatch in expenditure of personal nature. (II). Verification of Large Squared up Loans during the year was one of the reasons for selection of the case under CASS and hence it merited a proper examination. The assessee did not furnish complete information on this issue as was called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,00,000 0 In this regard, we are enclosing herewith the ledger for your ready reference.(Refer pg 119) Prem Arora 0 40,00,000 40,00,000 0 In this regard, we are enclosing herewith the ledger for your ready reference. (Refer pg 121) The asessee was again asked by the AO vide letter dated 28.11.2019 to file the following: Complete address, PAN and source of addition to unsecured loans during the year with complete evidence. File confirmations and copy of acknowledgements of ITRs for AY 2017-18. 1ST ISSUE INTRODUCTION OF CAPITAL:- 4. Considering the two issues the counsel has divide issues separately and argued accordingly. First, the counsel pointed out the first issue introduction of capital contribution by the partners. 4.1 The ld. Counsel first pointed out that the ld. AO issued notice u/s 142(1) on dated 17.10.2019 which is annexed in APB 1 to 3. The ld. Counsel has drawn our attention on the reply which was filed to the ld. AO in detailed. The reply is also annexed in APB pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making necessary enquiries/investigations in the light of the discussions made above and after giving due opportunity of being heard to the assessee. 4.4 Further argued that all the assessments for this assessment year 2017-18 was completed related to this partner. The source of the introduction of capital was already be verified by the assessing authority related to the individual assessee during the individual scrutiny assessments. During the argument the following details are mentioned by the ld. Counsel that the assessee has raised legal objections on the amount of capital contribution made by the partners cannot be added in the hands of the firm u/s 68 on the basis of following points: a. That all the partners of the firm from whom the capital was raised are identifiable and separately assessed to tax. b. That the amount received by the assessee firm had duly been reflected in the books of accounts of the appellant firm. c. That the investment made by the partners in the firm duly stands reflected in the hands of Audited Balance Sheet of the partners. d. That in major partners the assessment has been completed by the concerned AO and the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 305 to 311. 4. The copy of ITR along with the computation of income in which the share of the partner from the firm M/s Hoshiarpur Traders has duly been provided to the PCIT. [Refer page no 292 to 296 of the paper book relevant page no 294]. 5.The date wise investment account of M/s Hoshiarpur Traders in the books of the partner is enclosed at page no 312-316. 6. The audited Balance sheet along with the audit report was also submitted to the PCIT, Copy of same is enclosed at page no. 297 to 311 relevant page 310. 7. That from the above facts, it is evident that the AO of the partner has made a detailed enquiry through notice dated 09.12.2019 and the assessment order u/s 143(3) has been passed on 27-12-2019 i.e. after the reply to such questionnaire was furnished. Therefore, in no circumstance, it can be said that the order is erroneous or prejudicial to the interests of the revenue. UW Enterprises P Ltd AABCU0663M 3,25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash sales of Rs. 112 crore out of Total sales of Rs. 729 crores. The copy of reply of submitted to AO is enclosed at page no. 405 to 407. The copy of same was also submitted to before PCIT and therefore the PCIT was well versed with the fact that the enquiry of capital investmentby A.D. Enterprises P Ltd had duly been verified by the concerned AO. 4. That the assessee has also furnished date-wise capital account to the PCIT and the copy of the same is enclosed at page no 374-375.Furthermore, the assessee also submitted copy of cash book duly submitted during assessment proceedings to substantiate the source of capital investment made during the year under consideration. The copy of the cash book is enclosed at page no. 453-562 of the paper book. 5. Your Honour will appreciate that the investment made by the partner has duly been reflected in the audited balance sheet submitted before the PCIT and submitted before the AO of the partner. Pleases refer page no 401. The complete audit report is enclosed at page no 383-403. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.6 The following details were submitted by the assessee before both the revenue authorities in relation to the source and creditworthiness of the partners; a) Copy of cash book APB page nos. 81 to 94. b) Audited balance sheet APB page nos. 2 to 42. c) APB page nos. 305 to 311 and date wise investment APB page nos. 312 to 316. 4.7 In further argument the assessee submitted the following judicial ruling which is as follows: i. Judgment in the case of Principal Commissioner of Income-tax v. Vaishno Devi Refoils Solvex reported in [2018] 96 taxmann.com 469 [SC) SUPREME COURT OF INDIA and the relevant portion is reproduced below: Section 68 of the Income-tax Act, 1961 - Cash credit (Firm/partner, in case of) - Assessment year 2010-11 - For relevant year, Assessing Officer made addition to income of assessee-firm under section 68 on account of capital introduction by one partner of firm - He was of view that creditworthiness of partner who introduced capital had not been proved - High Court in impugned order noted that amount received by assessee-firm had been duly reflected in books of account maintained by concerned partner and that asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of cash credit - Tribunal, however, accepted assessee's plea that once partner, accepted having made deposits, no addition could be made in firm's income and held that no case was made out for addition to income of assessee-firm, even if deposits made with firm by partner were unexplained income of partner - Whether Tribunal was justified in holding so - Held, Yes iv. Judgment in the case of Commissioner of Income-tax v. Burma Electro Corpn. [2003] 126 TAXMAN 533 (PUNJ. HAR.) HIGH COURT OF PUNJAB AND HARYANA IT APPEAL NO. 101 OF 1999 dated AUGUST 9, 2000 [Refer page no. 13-15 of judgement paper book] and the relevant portion is reproduced below: Section 68 read with section 260A, of the Income-tax Act, 1961 - Cash credits - Assessment year 1989-90 Assessing Officer made additions to returned income of assessee-firm on account of unexplained cash credits in capital accounts of some partners - Tribunal deleted additions on ground that though there was no evidence on record to show availability of funds with partners at time of investment with assessee-firm, concerned partners admitted to have made those investments and revenue also failed to bring on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an creditors. 6. The ld. Counsel first draw our attention in APB pages 667 to 676 the submission of information before the PCIT in further argument the following details was submitted: Name of Party Address Document submitted before AO Documents submitted before PCIT Prem Arora AHNPK7425P 55, Blue City Colony, Meera Court, Loharka Road, Amritsar 1. Copy of Income Tax Return for Asstt. Year 2017-18 (please refer page 45 of the paper book) 2. Ledger account of Prem Arora in the books of Hoshiarpur Traders (please refer page no. 551 of the paper book) 3. Confirmation from Prem Arora that he has received advance from Hoshiarpur Traders (please refer page 44 of the paper book). It was clarified to the PCIT that unsecured loans was never raised but the advance was given to Prem Arora and the same was returned back. The relevant portion of reply submitted before the PCIT is reproduced below: As regard Prem Arora it is most respectfully submitted that the said amount was advanced in 31- 03-2016 and the amount receivable was Rs. 40, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mall Finance Bank. Please refer to page 546 of the paper book. 3. The affidavit of Sh. Naresh Aggarwal was also submitted before the PCIT in which it has been clarified by Sh. Naresh Aggarwal that the amount of Rs. 80 lacs has been remitted out of opening bank balance maintained with Capital Small Finance Bank. Please refer page 677 of the paper book. 4) Copy of ITR of Naresh Aggarwal for AY 2015- 16 declaring income of Rs 1103580/- Please refer page no 687. 5)Copy of bank statement for FY 2015-16 Please refer page no The ld. Counsel for the assessee respectfully relied on the judicial findings which are as below: CIT, Faridabad v. Laul Transport Corporation [2009] 180 Taxman 185 (Punjab Haryana) CHANDIGARH BENCH CIT v. Mark Hospitals (P.) Ltd. [2015] 58 taxmann.com 226 (Madras) `Garima Polymers (P.) Ltd. v. ACIT, Central Circle-16, New Delhi[2021] 131 taxmann.com 4 (Delhi - Trib.) Mod Creations (P.) Ltd. v. Income-tax Officer [2011]13 taxmann.com 114 (Delhi) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2002-03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts, assessee had discharged its onus as per requirement of section 68 and it was not required for assessee to explain sources of source i.e. genuineness of receipt of amount by ST from RBS and SST - Held, yes - Whether, therefore, impugned addition under section 68 made to income of assessee was to be deleted - Held, yes [Paras 13 to 16] [In favour of assessee] 7. The ld. CIT-DR vehemently argued relied on the order of revisional authority. But unable to bring any contrary fact in relation to the submission of the assessee. 8. We heard the rival submission and relied on the documents available in the record. The entire finding of the revisional authority was not on any cogent material. The assessment was completed by a process of verification on which the assessee had completely participated. After the thoughtful consideration of the case, we observed that the observation of the revisional authority is related to lack of investigation by the assessing authority related to creditworthiness genuineness of transaction related to assessee with partners loan creditors. The assessee in its support had complied the requirements as raised by both the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d revisional order passed by Commissioner - Whether in view of fact that ITO had made reasonably detailed enquiries, had collected relevant material and discussed various facets of case with assessee, order of Commissioner to direct fresh assessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263 - Held, yes - Whether, therefore, impugned order of Tribunal was to be upheld - Held, yes SMT. ANITA MALPOTRA V. ITO 109 TTJ 76 (ITAT, Amritsar) Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2001-02 - Against assessment order passed by Assessing Officer, Commissioner passed order under section 263 on grounds that Assessing Officer had failed to make enquiry/investigation about expenditure incurred on electricity and production obtained, and that production was required to be worked out by taking into account decision in case of Sant Stone Crusher (P.) Ltd. order dated 19-9-2005 in IT Appeal No. 185/(Asr.) 2005 - However, facts revealed that during assessment proceedings, Assessing Officer had examined and test checked books ..... X X X X Extracts X X X X X X X X Extracts X X X X
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