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TMI Blog2024 (11) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of revenue. It is submitted that the order passed by the learned A.O. is neither erroneous nor prejudicial to the interest of revenue. On facts and circumstances of the case, the order passed by Pr. C.I.T, u/s 263 of the Act is completely incorrect both on facts and in law and the same be quashed and set accordingly. 3. The learned Pr. C.I.T. has erred in holding that the Assessing Officer has not verified the issue of accommodation entries amounting to Rs. 47,50,000/-, It is submitted that the case being reopening of assessment had reopened on ground of fictitious loan transactions of Rs 47,50,000/- and after verification of objection filed against such reopening and after due application of mind, the Ld, AO has passed the order accepting the contention of the Appellant. It is therefore submitted that is no question of any lack of inquiry or verification on the part of assessing officer and further under assessment of income. In view of this, order passed u/s 263 being totally illegal and unjustifiable be set aside and Assessment Order passed u/s 147 r.w.s 144B of the Act be restored. The same please be held accordingly. 4. The learned Pr. C.I.T. has erred in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 29, 2014, declaring a total income of Rs. 12,25,450/-. Order under section 147 read with section 144B of the Income-tax Act, 1961 (Act), was passed on March 22, 2022 accepting the income as per the original assessment order under section 143(3) of the Act dated December 26, 2016, at the figure of Rs. 12,25,450/-. However, the Principal CIT upon reviewing the records, observed that the assessee had obtained accommodation entries of a sum of Rs. 47,50,000/- from an entry operator named Jignesh Shah. The case of the assessee was reopened u/s 147 of the Act based on specific information about these accommodation entries. Despite this, the Assessing Officer (A.O.) did not make any additions related to these accommodation entries, and therefore, the assessment order was erroneous and prejudicial to the interests of the Revenue. The assessee submitted that the A.O. had verified the issue before passing the assessment order under section 147 read with section 144B of the Act and had not made any additions. The assessee also claimed that the case was both reopened and subsequently closed with the permission of the relevant office. After reviewing the submissions of the assessee, Princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee relied on several judicial decisions to support this contention. The Ld. Counsel for the assessee further submitted that this is not a case where the A.O. failed to conduct an inquiry, as provided in Explanation 2 of Section 263, which was inserted with effect from June 1, 2015. The A.O. clearly made due inquiry based on the recorded reasons, and took into consideration the detailed reply filed by the assessee, and thereafter passed the order without making any addition. Since due inquiry was conducted by the Assessing Officer, Explanation 2 of Section 263 is not applicable, particularly as the case pertains to AY 2014-15, prior to the insertion of Explanation 2. The PCIT, therefore, wrongly interpreted and applied Explanation 2. To support this argument, the Ld. Counsel for the assessee relied on several decisions in support of his contention. The Ld. Counsel for the assessee also submitted that the PCIT's notices under section 263, dated 09-02-2024 and 26-02- 2024, stated that the assessee had received accommodation entries of Rs. 47,50,000/- from Jignesh Shah, and that the A.O. should have added this bogus transaction as unexplained cash credit under section 68 read with sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us loan (entry operator beneficiaries) of Jignesh Shah for a sum of Rs. 47,50,000/-. In the order passed under section 147 of the Act, the assessing officer observed that notice under section 148 had been issued upon the assessee on the basis of information that the assessee has entered into transactions as fictitious loan entry operator beneficiary amounting to Rs. 47,50,000/- of Jignesh Shah. In the reassessment proceedings, the assessee raised a specific objection that the assessee had not taken any loan from Jignesh Shah in any manner and accordingly, the reassessment proceedings which have been initiated are bad in law. The assessing officer accepted the contention of the assessee and no variation in the income of the assessee was made in the order passed under section 147/148 of the Act. Thereafter again, Principal CIT issued notice under section 263 of the Act with the observation that the case of the assessee was reopened under section 147 of the Act on the ground that the assessee had taken accommodation entries amounting to Rs. 47,50,000/- from Jignesh Shah. Further, Principal CIT proceeded to hold that from the information available on record, assessee had received accom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (3) as well as under section 147 of the Act) have examined this issue and therefore, the contention of the principal CIT that there was lack of adequate enquiry, cannot be accepted. In the case of Sir Ratan Tata Trust v. DCIT 122taxmann.com273 (Mumbai - Trib.), the ITAT held that if receipt of some inputs at last minute from a third party cannot result in an extension of time for completion of assessment under section 143(3) directly, it cannot be done by way of invoking Section 263 either. The Tribunal made the following observations while passing the order on this aspect: 47. As we have seen above, one of the allegations that the learned Commissioner has made is against the Assessing Officer's "not using the material available with him to take the matter to the logical conclusion," and it is also observed by the learned Commissioner that "this note itself makes the order of Assessing Officer on this issue erroneous and prejudicial to the interests of the assessee." What is being done now is to send the matter back to the Assessing Officer for examination de novo so as to inquire into the allegations so made by Cyrus Mistry. What this approach overlooks is that it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings. The opinion of the Ld. PCIT referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. The law interpreted by the Hon'ble courts makes it clear that Ld. PCIT before holding the order of the Ld. A.O as erroneous in so far as prejudicial to the interest of revenue should have to conduct necessary enquiries or verification in order to show that the findings given by Ld. A.O is unsustainable in law. Similar view was taken by the Hon'ble Delhi High Court in the case of D.G. Housing Projects Ltd. wherein the Hon'ble Court after referring to judgments of Hon'ble High Court in the case of Addl. CIT v. Gee Vee Enterprise [1975] 99 ITR 375 (Delhi), Sunbean Auto Ltd. (supra), Malabar Industries held in favour of the assessee confirming the order of the Tribunal observing as follows:- 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng attention to the assessing officer to make an addition in the hands of the assessee. Firstly, we observe that the 263 order has not pointed out to any specific infirmity/lack of enquiry by the assessing officer and has also not pointed out as to how the order passed under section 147 of the Act is erroneous and prejudicial to the interest of revenue and secondly, in the 260 order, the principal CIT has given a specific direction/finding that the assessing officer should have made additions on account of accommodation entry, taken by the assessee during the impugned year under consideration. Accordingly, in view of the facts highlighted before us, we hold that the order passed under section 263 by principal CIT is liable to be set aside for the reason that firstly, the 263 order there is no specific finding by the principal CIT as to how the assessment order is erroneous insofar as prejudicial to the interest of revenue and secondly, from the facts placed on record the issue for which 263 proceedings have been initiated by the principal CIT have already been examined by the Department in detail, both during the course of original assessment proceedings as well as reassessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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