TMI Blog2023 (10) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] - As a question would arise whether, firstly, the action of the AO is unsustainable in law or not, owing to such assertions on mere inadequacy and secondly, whether the mandate u/s 68 of the Act for extent of inquiry by way of cross verification is absolute or left to the discretion to be reasonably exercised by the AO. As observed in the preceding paras, even if inquiry with regard to source of source of loan in a particular manner as suggested by Pr. CIT is omitted to be carried out, the provisions of Section 68 of the Act cannot be automatically fastened on the assessee. To reiterate, no objective material is discernible from the SCN or from the revisioanal order to implicate the assessee per se. Having regard to the prerogative vested with the AO towards the extent and manner of inquiry for drawing satisfaction, it is difficult to hold that the action of the AO is unintelligible. AO has not committed any error in not chasing will of the wisp in the absence of any brazen circumstances available. In the light of aforesaid discussion, the basis of issuance of show cause notice u/s 263 of the Act does not appear to be tenable in law in the peculiar set of facts. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT in invoking the provisions of section 263 of the Act is bad in law. 4. That the Ld. Pr. CIT has not applied his mind while initiating proceeding u/s 263 of the Act as the search was conducted in the case of Jain Bros on 19.04.2010 whereas the loans in issue were raised by the assessee in the FY 2012-13. 5. That the Ld. Pr. CIT has erred in invoking the provisions of section 263 of the Act on the ground that no proper inquiry was made by the Assessing Officer during the assessment proceeding whereas the extensive inquiry had been made by the Assessing Officer during the original assessment proceeding. 6. That the Ld. Pr. CIT has not considered that inadequate / insufficient inquiry does not amount to lack of inquiry so as to attract the provisions of section 263 of the income Tax Act in view of even newly inserted provisions of Explanation 2 to section 263 of the Act. 7. That the Ld. Pr.CIT himself had not examined as to whether loan of Rs. 8 crore raised by the assessee were accommodation entry so as to make the order passed by the Assessing Officer erroneous within the ambit of section 263 of the Act; hence the directions given by the Pr. CIT to frame t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NO.394A, C.R. BUILDING, IP ESTATE, NEW DELHI (Email delhi.cit3@incometax.gov.in) Tel 23378750 ---------------------------------------------------------------------------------- F.No. Pr.CIT-3/Revision/DLF/2017-18 Dated: 21.03.2018 To The Principal Officer, M/s Ellora Infratech Private Limited, D-22/5, Okhla Industrial Area, Phase-I, New Delhi - 110020. Sub: Show Cause Notice w/s 263 of the Income Tax Act, 1961, AY. 2013- 14 regarding. Ref: Assessment Order u/s 143(3) of the IT Act, 1961 dated 21.01.2016 for AY. 2013-14 ************* Kindly refer to the subject mentioned above. 2. The case of M/s. Ellora Infratech Put. Ltd. for the A.Y.2013-14 has been selected for complete scrutiny under CASS on the following reasons: (i) Large increase of Unsecured Loans. The case was completed u/s. 143(3) of the IT. Act, 1961 dated 21.01.2016 at a return loss of Rs. 2,63,933/- without drawing any adverse inference. During the year, the company had received unsecured loan of Rs. 8 crore from the following companies: S.No. S. No. Name of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be furnished by 30.10.2015. In the following cases notices returned unserved with postal remark left': S.No. S. No. Name of the company Amount 1 M/s Bailley Foods Pvt. Ltd Rs. 47,00,000/- 2 M/s LessureBuildcon Pvt. Ltd: Rs. 75,00,000/- 4 M/s White House Buildtech Pvt. Ltd. Rs. 55,00,000/- Further, In case of M/s Sandeep Credits Pvt. Ltd, no information was furnished in compliance to notice issued u/s 133(6) of the IT Act, 1961. Confirmation was filed on 28.10.2015 by M/s Vinsan Credits Securities Pvt. Ltd vide letter dated 21.10.2015 even though no notice u/s.133(6) of the I.T. Act, 1961 was issued to the company by the then AO. These facts further strengthen the fact that loan received from these companies was merely an accommodation entry. In view of the above facts, notice u/s. 133(6) of the I.T. Act, 1961 was issued again on 10.12.2015 in the name of M/s RKG Finvest Pvt. Ltd., M/ Sandeep Credits Pvt. Ltd., M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order for AY. 2005-06 in the case of Sh. Virendra Kumar Jain, the AO confronted various materials impounded during the search seizure operation, and held that Jain brothers are accommodation entry provider. During the assessment proceedings, both of them chose not, to explain the source of cash deposits, therefore, entire cash received was held as unaccounted income and further commission of 1.8% was also charged to tax as income earned from commission for providing accommodation entries. In second appeal, the Jain Brothers admitted before the Hon'ble ITAT that they are engaged in the business of providing accommodation entries and charging commission at certain percentage from the beneficiaries. Accordingly, the Hon'ble ITA'T in their case in ITA Nos.6991 to 6997/Del/ 2014 ITA Nos. 6998 to 7004/Del/2014 vide order dated 03.02.2016 decided to set aside the order to the A.O. asking him to assess Jain brothers in light of certain judicial pronouncements all of which pertain to assessing accommodation entry operators on the basis of their commission income. In the nutshell, ITAT has not interfered with the finding of the department that Jain brothers are acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, loan of Rs. 6 crore received from M/s RKG Finvest Ltd. and M/s Trans National Growth Ltd. is merely an accommodation entry and the A.O. has not made any proper enquiry and also not take cognizance of the search material circulated by the Investigation Wing of the Department in case of Jain Brothers. Further, loan of Rs. 2 crore received from other companies also paper companies engaged in the business of providing accommodation entries as discussed above. You are, therefore; directed to show cause as to why an order In terms of provisions of section 263 may not be passed for AY 2013-14 setting aside the order passed u/s 143 (3) dated 21.1.2016 in your case. You are afforded ail opportunity of being heard to contest the charge made in this notice by appearing personally or through an authorised representative on the 26th March, 2018 at 3.30 AM in Room No. 394A, C. R. Building, I.P. Estate, New Delhi-110002 or Me a written, submission by the appointed date, failing which it will be presumed that you have no submission to make in this regard and the matter will be decided without further notice. Pr. Commissioner of Income Tax-03 New Delhi [UNDERLINE IS OURS] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d: Rs. 75,00,000/- 3 M/s Sandeep Credit Pvt. Ltd. Rs. 23,00,000/- 4 M/s White House Buildtech Pvt. Ltd. Rs. 55,00,000/- 5. M/s. Vinsan Credit Securities Pvt. Ltd. Rs. 20,00,000/- In the confirmation, companies mentioned S. No. 1 to 4 were operating from different addresses. However, confirmation letter have been generated or the same date i.e. 09.09.2015. Language of the confirmation is also word to word same although no authorized signatory was common. These facts signifies that it was only a cover up exercise by the assessee company. Notices u/s 133(6) of the IT Act, 1961 were issued on 18.10.2015 through speed post in the name of M/s Bailley Foods Pvt. Ltd., M/s Lessure Buildcon Pvt. Ltd., M/s. Sandeep Credits Pvt. Ltd. M/s. White House Buildtech Pvt. Ltd. to furnish details of transaction held with the assessee company along with supporting documents in order to justify identity creditworthiness and genuineness of the transactions. The information was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators were working as director of the company. It may be mentioned here that search/survey operation us 132/133A of the I.T. Act, 1961 was conducted by Investigation Wing of Income Tax Department Delhi on 19.04.2010 at the residential and business premises of Shri Surender Kumar Jain and his brother Shri Virender Jain. Various incriminating documents were seized and impounded. During post search/survey operation of the seized /impounded documents and spot inquiries conducted, it was revealed that Shri Surender Kumar Jain and Shri Virender Kumar Jain were engaged in the business of providing accommodation entries-by making payments in form of RTGS/Cheques/PO DD in lieu of cash to a large number of beneficiary companies through more than 100 paper and dummy companies/ firms/proprietorship concerns floated and controlled by them through various persons by appointing them as directors / partners/ proprietors. Post search, seizure operation carried by the Department, both Jain brothers continued their old activity of accommodation entry provider in shape of share capital/premium, loan etc. and also formed new corporate entity so that nobody keep track on them. Besides, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by accepting funds, from their beneficiaries through mediators and converting the same into share premium transactions in the beneficiary company It suspects the entire racket to be worth about Rs. 8,000/- crore of slush funds and has detected about half of it as per its latest probe. The Enforcement Directorate also confirmed that the modus operandi of Jain brothers was to launder the unaccounted money through the process of placement of funds, layering of transactions and the final integration of laundering money into the banking charnel camouflaged as legitimate share premium transactions. Funds were brought in by the mediators on behalf of the beneficiaries through the mediators. Jain Brothers were providing accommodation entries by accepting funds from their beneficiaries through mediators and converting the same into share premium transactions in the beneficiary company. In this process Jain Brothers earned money as a certain percentage of the unaccounted money converted into share capital share premium. The Enforcement Directorate also arrested one of the mediators of this group Shri Rajesh Aggarwal who facilitate accommodation entry for the end users. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der with a direction to the Assessing Officer to pass a fresh reasoned assessment order based on facts and issues discussed in the revisional order. 6. At the time of hearing, the Ld. Counsel at the outset pointed that the present appeal is filed belatedly by about 230 days. An application for condonation of delay dated 14/09/2021 was adverted to in this regard to demonstrate existence of mitigating circumstances. It was essentially pointed out that the delay is attributable to lapse on the part of his legal advisors to communicate the order in time. Coupled with this, some time was spent to visualize as to whether to opt for remedy by way Writ before Hon ble High Court or prefer appeal before ITAT. It was pointed out that the assessee has a prima facie case to dislodge the revisional order and thus no presumption of malafide can be imputed. It was further pointed out that the delay occurred is not intentional or deliberate and the aforesaid delay of 230 days occurred has not caused any serious prejudice to the Revenue The learned counsel referred to the decision rendered by the Hon ble Supreme Court in the case of Collector of Land Acquisition vs. Mst. Katiji Ors. 167 ITR 471 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f limitation (vi) the Pr. CIT has vaguely referred to some new material discovered post assessment in the SCN without any minimum enquiry thereon himself nor showing the contents thereof to the Assessee at any point of time despite the structured mandate of s. 263 and codified safeguard of opportunity. 7.1 As further submitted, while the Pr.CIT brushed aside the bar of limitation raised on behalf of the assessee but however did not care to provide any opportunity to meet the allegations of show-cause on merits. 7.2 The Ld. Counsel contends that the Pr.CIT has brushed aside the assessment order on flimsy grounds solely at the instance of the new incumbent in assessment without giving any opportunity to defend the assessment order and to bring the perspective of the assessee on the subject matter. As further quipped, the revisional action of such wide amplitude carrying adverse consequences has been exercised casually at the fag end of the limitation (despite time limit of 2 long years available from the end of the financial year in which assessment order under review was passed) in total disregard to the canons of judicial propriety and thus has fastened civil consequences on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO also launched independent enquiry by one of the statutory methods and issued notice under s. 133(6) to the lenders to enquire into the veracity of loans provided to the assessee. To obtain independent verifications of loans and collection of supporting documents in relation to credit entries, notices under Section 133(6) were issued on 10.12.2015 in the name of all lenders namely, RKG Finvest Pvt. Ltd., Sandeep Credit Pvt. Ltd., Bailley Foods Pvt. Ltd., White House Buildtech Pvt. Ltd., Lessure Buildcon Pvt. Ltd. and Vinsan Credit Securities Pvt. Ltd. It can also be seen from the proposal of the AO addressed to the Pr. CIT that lenders have duly responded to such notices and furnished the desired information and confirmed the factum of lending to the assessee. The source of the loans were thus examined by the AO to form a credible view on propriety of loans in question. The AO thus acted with degree of caution and circumspection. Hence, the allegation that adequate inquiry contemplated was not made on the point in issue is contradictory to the assessment records itself and does not hold any water. Also, the case of the Pr.CIT is nowhere about the lack of inquiry per se but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction under s. 263 of the Act by the PCIT and revisional order passed as a sequel thereto seeking to set aside the completed assessment under s. 143(3) of the Act is in controversy. 10. Supervisory jurisdiction vested under Section 263 of the Act enables the concerned Pr.CIT/CIT to review the records of any proceedings and order passed therein by the AO. It empowers the Revisional Commissioner concerned to call for and examine the records of another proceeding under the Act and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue, then he may (after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary), pass such order thereon as the circumstances of the case justify, including the order enhancing or modifying the assessment or canceling the assessment and directing afresh assessment. Thus, the revisional powers conferred on the Pr.CIT/CIT under s. 263 of the Act are of very wide amplitude with a view to address the revenue risks which are objectively justifiable. 11. In the backdrop of factual matrix, subsisting in the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 26/RPR/2021 order dated 29/09/2021] wherein the overriding importance of effective and real opportunity to the assessee in the course of revisional proceedings was underscored: 14. We now also advert to the vehement opposition on behalf of the assessee on the ground of non-issuance of notice and on total lack of opportunity while concluding the proceedings under section 263 of the Act. It has been demonstrated on facts that only show cause notice issued to the assessee was for attendance on 15.03.2021 calling the assessee at earlier point of time i.e. 11.15 A.M on the same date, whereas the notice itself was issued at 1.49 PM. We are constraint to observe that such casual approach of a very senior functionary of the Department does not augur well in the eyes of the public. As stated in the bar, no such notice was served at all on the email id. as claimed. No other notice was served. Palpably, it is a case of total lack of opportunity to the assessee to defend its case. A question would arise as to whether a failure to give a reasonable opportunity to the assessee of being heard was only a procedural irregularity in such gross circumstances and thus curable and did not render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment embodied in s. 263 of the Act. The revisional order passed without opportunity deserves to merge in void. The lack of opportunity has vitiated the revisional order on a standalone basis without any thing more. 15. The assessee has also questioned the assumption of revisional jurisdiction under s. 263 alleging that such action is at the behest of the new incumbent AO. 15.1 As noted, the substituted incumbent of the office of the AO moved a proposal to Pr.CIT for exercise of powers under s. 263 vide communication dated 20/03/2018. The Pr. CIT issued SCN on the very next day i.e. 21/03/2018. On reading the contents of the SCN in conjunction with aforesaid proposal, it is seen that the line of reasonings in the proposal is reproduced in verbatim in the SCN. Interestingly, the AO in its proposal made reference to then AO twice to disown the alleged mistake of predecessor AO, which is quite understandable. What is not understandable is the use of similar expression of then AO copied in the SCN too. The action of the Pr. CIT is overtly on dotted line and a mere copy paste. The SCN ex-facie reflects gross lack of application of mind by the Pr. CIT. It can be safely inferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that requisite enquiries were made by Assessing Officer towards identity, capacity and genuineness of unsecured loans received during the year. The issue was very much present to the mind of the AO. The relevant documents were also shown to have been filed in the assessment proceedings. We simultaneously notice a pertinent fact that the lenders were subjected to enquiry under s. 133(6) too by the AO for this purpose and evidences were collected and collated to weigh the surrounding circumstances. On such facts, one cannot be heard to say that it is a case of no enquiry into the subject matter but may at best be a case of inadequacy in the extent of enquiry . On the face of such enquiries conducted, the AO has not mechanically accepted the assessee s claim but has embarked upon an enquiry considered necessary to the wisdom of the AO albeit not matching from the idealistic point of view of the Revisional Commissioner. The records suggest that the AO cannot be blamed to have acted in a perfunctory manner merely because the expectations of Revisional Commissioner are purportedly not meet. 16.1 Noticeably, it is also not the case of Pr. CIT either that it is a case of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT v. Durga Prasad More, [1971] 82 ITR 540 (SC). Significantly, S. 68 of the Act uses the expression may and thus enables the AO to exercise statutory discretion in a pragmatic and judicious manner, for or against, the assessee. The AO is thus not obliged to invoke the sphere of S.68 of the Act in all cases where the source is not proved to the last mile. This apart, it is well settled that while discharging the onus cast upon the assesse, it is not the stringent requirement of law that assessee needs also to prove the source of source i.e. money sourced by the lender to provide loan to the assessee. Once the assessee is able to establish that the money has been received from the source belonging to third party, he cannot be burdened with a further onus of establishing the source from which such third party has been able to obtain money. Useful reference in this regard can be made to the decision of Hon ble Gujarat High Court in case of Rohini Builders (supra) and also Nemi Chand Kothari (supra); ITO vs. Diza Holdings (P) Ltd. 255 ITR 573 (Kerala) and so on. Thus, when seen in the light of judicial precedents elucidating law pertaining to Section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserted by Finance Act, 2015 w.e.f. 01.06.2015 which seeks to clarify that the order passed by the lower authorities to be erroneous in so far as prejudicial to the interest of the Revenue in the event of absence of inquiries or verifications which should have been made . The aforesaid clause, to our mind, only provides for situation where inquiries or verifications should be made by reasonable and prudent officer in the context of the case. Such clause cannot be read to authorize or give unfettered powers to the Revisional Commissioner to revise each and every type of mistake in an order in a plannery manner. The applicability of the clause is thus essentially contextual. As observed in the preceding paras, even if inquiry with regard to source of source of loan in a particular manner as suggested by Pr. CIT is omitted to be carried out, the provisions of Section 68 of the Act cannot be automatically fastened on the assessee. To reiterate, no objective material is discernible from the SCN or from the revisioanal order to implicate the assessee per se. 16.6 Having regard to the prerogative vested with the AO towards the extent and manner of inquiry for drawing satisfaction, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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