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TMI Blog2025 (4) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee is a Limited Liability partnership engaged in Real Estate business. Search u/s. 132 of the Act conducted on 10.01.2019 in the case of assessee. The assessee e-filed return of income on 30.09.2020 declaring income of Rs. 28,60,630/-. The case selected for scrutiny followed by validly serving of notices u/s. 143(2) and 142(1) of the Act. Various details were called for regarding the documents found during the course of search as well as statement given. Information was also called about the onmoney received on the immovable properties held as stock in trade sold during the year. Based on these observations, ld. AO made addition amounting to Rs. 3,36,95,925/- and after duly taking approval from Addl.CIT u/s. 153D of the Act assessed the income at Rs. 3,65,56,555/- Subsequently, ld. PCIT having jurisdiction u/s. 263 of the Act called for the assessment records of the assessee for A.Y. 2019-20 and after perusal of the assessment records noticed that there are huge unsecured loans standing in the books. However, ld. AO has not called for the necessary details to verify the Identity and Creditworthiness of the unsecured loans and genuineness of the transaction. Ld.PCIT iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case it is seen that the AO has not examined and verified the above issues and therefore income has been under assessed. Therefore, assessment order u/s 143(3) of the Act dated 20.04.2021 passed by the AO for A.Y. 2019- 20 appears to be erroneous in so far as it is prejudicial to the interest of revenue. 06. In view of the facts and circumstances mentioned above, the assessment order passed u/s 143(3) of the Act in the case of M/s Meenamani Ganga Builders LLP for A.Y. 2019-20 prima facie appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of the provisions of Explanation-(2)(a) to Section 263(1) of the Income Tax Act. I, therefore, intend to set aside/ modify the assessment order within the meaning of section 263 of the I.T. Act, 1961. An opportunity of being heard is therefore, given to you. You are requested to attend in person or through your authorized representative on 20.02.2024 at 01:00 PM in my office." 4. The assessee in its reply submitted that details of unsecured loans were called for by the AO which were duly supplied. Majority of the unsecured loans are the opening balances of various parties brought forward from last year a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make further inquiries to obtain confirmation along with details supporting their creditworthiness, identity and genuineness. Further, in response to the notice u/s 133(6) of Act dated 07.10.2022, the assessee had only submitted confirmation from 70 parties and did not submit corroborating evidence. Also, no verification/ examination on the aforesaid issue has been done during the assessment proceedings by the AO. The AO should have verified/enquired/examined this issue." 6. Ld.PCIT accordingly held that the assessment dated 20.04.2021 is erroneous and prejudicial so far as prejudicial to the interest of Revenue as the AO has passed the assessment without making necessary examination/ verification/enquiries on the issues related to the genuineness of unsecured loans. 7. Now aggrieved assessee is in appeal before this Tribunal. 8. Ld. Counsel for the assessee at the outset submitted that the assessment order in question has been framed after taking valid approval u/s. 153D of the Act and the revisionary power invoked by the ld. PCIT deserves to be held as invalid as the approval granted u/s. 153D has not been revoked. He placed reliance on the decision of Coordinate Bench in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trating the break-up of 203 unsecured lenders (copy attached once again at Pg. 40-46 of this Written Note); the genuineness and creditworthiness of which were alleged to be not verified by Ld. AO was provided by the Ld. AR of the Appellant. 2.3.7. The break-up of these 203 unsecured lenders is divided into following: Sr. No. Particulars Number of lenders Pg. number a) Details of loans which existed in FY 2017-18 (i.e. AY 2018-19) and witnessed no increase in the assessment year under consideration 60 40-41 b) Details of loans which existed in FY 2017-18 (i.e. AY 2018-19) and b) increase in the assessment year under consideration was only on account of interest 131 42-44 c) Details of loans which existed in FY 2017-18 (i.e. AY 2018-19) and c) Increase in the assessment year under consideration was only on account of additional loan availed 6 45 d) Details of loans which were availed in FY 2018-19 (i.e. AY 2019-20 and did not existed in the preceding years 6 46 Total 203 2.3.8. It can be observed that from the above table that majority of the unsecured loans in AY 2019-20 are arising from prior years wherein no further addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured loan is verified and accepted, it cannot be held that 'no enquiry' was carried out into the matter by the Ld. AO for the year under consideration. 2.3.14. In view of the above facts, it can be seen that an enquiry was explicitly raised by the Ld. AO in respect of the loans during the year under consideration and the documents were verified. The view adopted by the Ld. AO during the assessment proceedings with regard to the said issue cannot be reviewed on mere change of opinion. 2.3.15. It may be noted and appreciated that an order cannot be termed as erroneous unless it is not in accordance with law. Further, it has been established by various Courts that if the Ld. AO makes assessment in accordance with law, the same cannot be declared as erroneous by the CIT/ PCIT merely because the opinion or judgement of the CIT/PCIT differs from that of the Ld. AO. 2.3.16. To substantiate the above, we place reliance on the following judicial pronouncements: A. Bhikhabhai Rajabhai Dhameliya Vs. Principal Commissioner of Income-tax [2023] 151 taxmann.com 493 (Surat-Trib.) B. Principal Commissioner of Income Tax Vs. Vaishnodevi Refoils & Solvex [2018] 96 taxman.com 469 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er stated that the issue of unsecured loans has been examined in detail by the AO as the specific information was called in the notice u/s. 142(1) of the Act dated 08.03.2021 and in reply on 16.04.2021 the assessee furnished the details along with the ledger account, confirmations, stating that the issue of unsecured loans has been examined by the AO and therefore since there is adequate enquiry, ld. PCIT erred in invoking revisionary powers. Reliance placed on following decisions : Sr. No. Particulars 1 Principal Commissioner of Income-tax Vs. Prakhar Developers (P.) Ltd [2024] 162 taxmann.com 48 (Madhya Pradesh) 2 Shri Ramamoorthy Vasudevan Vs. The Pr. Commissioner of Income Tax (Central) (ITA Nos.967 & 968/PUN/2016) (Pune- Trib) 3 M/s. B.U. Bhandari Schemes Vs. The Pr. Commissioner of Income Tax-Central (ITA 637 to 643/PUN/2018) 4 Smt. Abha Bansal Vs. Principal Commissioner of Income-tax, (Central), Gurgaon [2021] 132 taxmann.com 231 (Delhi-Trib) 5 Gyan Infrabuild (P.) Ltd. Vs. Principal Commissioner of Income-tax (Central) [2024] 162 taxmann.com 664 (Patna-Trib) 6 Devender Kumar Gupta Vs. Principal Commissioner of Income-tax [2024] 166 taxmann.com 95 (Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioned or/ Commissioner may call for and examine the records of any proceeding under this Act, and if he considers that any order passed therein by the (Assessing) Officer (or the Transfer Pricing Officer, as the case may be, Is erroneous in so far as it is prejudicial to the interests of the revenue, 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,- i. an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or ii. an order modifying the order under section 92CA; or iii. an order cancelling the order under section 92CA; and directing a fresh order under the said section). 1.4 The above section slates that, any order can be revised u/s 263 of the Act if it is erroneous and prejudicial to the interest of revenue. The basic foundation of section 263 of the Act is that the PCIT/CIT is empowered to revise any order passed by the assessing officer if such order is erroneous and prejudicial to the interest of revenue. Hence, if the contention of assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders mentioned in sub-clause (i) and (ii) can also be revised u/s 263 of the Act. This explanation nowhere mentions that only the orders passed on the basis or directions issued u/s 244A of the Act can be revised u/s 263 of the Act. The said explanation is only in clarificatory nature and to reiterate the existing position that the assessment orders issued on the basis of directions of JCIT can also be revised. 1.8 It is also submitted that there is no statutory provision barring the jurisdiction of Principal Commissioner to invoke sec 263 of the Act to revise the assessment order passed after obtaining the approval u/s 153D of the Act. Reliance in this regards is placed on the following decisions: Hon'ble Supreme Court T.N. Civil Corporation vs CIT "4. In any event we are of the view that having regard to the subsequent amendments to the Act issued from time to time there was no scope for limiting the phrase order passed by the Income-tax Officer' In section 263 to exclude orders passed by the Income-tax Officer on the directions of a superior authority either under section 144A or 144B." Hon'ble Karnataka HC in case of Devas Multimedia Pvt Ltd v. PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the AO pursuant to the DRP decision. Hon'ble Punjab and Haryana HC in case of Osho Forge Ltd v. CIT In the said case, the Hon'ble High Court dealt with the issue of remand order passed by the assessing officer in compliance to the revision order u/s 263 of the Act. The Hon'ble HC while observing the supervisory hierarchy in the department held that while passing assessment order read with revision order u/s 263 of the Act, there is no question of seeking an approval from the Joint Commissioner or the Additional Commissioner Officer lower in rank than Commissioner for complying with the directions given by the Commissioner. Thus, the Hon'ble High Court upheld the validity of revision order u/s 263 of the Act even though the original assessment order was passed with the approval of JCIT u/s 153D of the Act. In fact, in para 11 of the decision, the Hon'ble Court also took the note of the fact that approval of under Section 153D was not set aside by the Ld. PCIT. Hon'ble Delhi ITAT Kapil Mehta vs PCIT (Central) "6.17 Therefore, natural corollary would be show that all orders of search and seizure passed under Section 153A or under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . William Britto Vs. CIT, Karnataka [2015] 56 Taxman 170 [Panji- Trib]" 1.10 Applying the above decisions to the present case, it can be concluded that the Pr. CIT has power to revise any order u/s 263 of the Act. There is no such restriction that if the order is passed after approval u/s 153D of Additional Commissioner, the same cannot be revised. Hence, the order passed u/s 263 of the Act in the present case revising the assessment order u/s 153A of the Act is within jurisdiction and may be not quashed. The referred judgment(supra) in the case of Kapil Mehta Vs. PCIT (central) Delhi (Trib) and Dr. William Britto Vs. CIT, Karnataka [2015] 56 taxmann 170 (Panji-Trib) are specially relied upon as both the judgements are directly on the subject matter involved with regard to additional ground raised by the appellant. Both the judgements has clearly interpreted the power of PCIT u/s 263 of the act with elaborate discussion on the legal aspects. Hence, in view of the above discussion, the order passed u/s 263 is justified and may not be quashed. The above submission may be kindly considered." 10. The assessee has also filed rebuttal to the submissions made by the ld. DR and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; 82[(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law." 16. In the light of above, provisions of section 263 as well as the judgment of Hon'ble Apex Court in the case of Malabar Industries Company Ltd.(supra), we now proceed to examine the facts of the instant case. We notice that as on 31.03.2019 unsecured loans from 203 parties amounted to Rs. 52,19,93,434/- and the same included unsecured loans from related parties at Rs. 11.98 crore approx and the remaining from the other parties at Rs. 40.22 crore approx. Now the assessee was subjected to search on 10.01.2019 and this was the year of search for which the return of income was filed on 30.09.2020. For the year under appeal, ld. AO had to carry out detailed assessment proceedings and apart from search material he is required to examine all other financial transactions carried out during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d addition for unexplained cash credit can be made in the hands of assessee. Satisfaction of the AO depends on various enquiries. The assessee in the instant case has furnished the details of unsecured loans which mainly contains balance of unsecured loans brought forward from preceding years as well as loans taken during the year from the old parties as well as new parties and the interest charged thereon. The assessee has also furnished the confirmation letters which contain the names and addresses of the cash creditors along with their PAN Numbers. Now after receiving these details, there is no further inquiry carried out by the AO. In the assessment order also, the discussion is only with regard to the on-money transactions found during the course of search. At this juncture, we would like to take note of the Hon'ble Apex Court in the case of Kale Khan Mohd. Hanif Vs. CIT (1963) 50 ITR 1 where the Hon'ble Court laid down the proposition with regard to examination of nature and source of cash credit u/s. 68 and Hon'ble Court held that three limbs needs to be examined, namely Identity of the cash creditor, creditworthiness of the cash creditor and genuineness of the transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gements and after duly examined the facts we have reached this conclusion that ld. PCIT has rightly invoked jurisdiction u/s. 263 of the Act and has also rightly held the order of the AO as erroneous and prejudicial to the interest of Revenue so far as the issue of unsecured loans remain to be verified during the year. 20. Before parting, we would also like to deal with the contentions of ld. Counsel for the assessee that assessment order has been framed after taking due approval u/s. 153D of the Act and without revoking the order u/s. 153D of the Act, ld. PCIT erred in invoking section 263 of the Act and setting aside the assessment order. We have gone through the assessment order and notice that ld. AO has nowhere dealt with the issue of unsecured loans. He has only dealt with the issues arising out of the search action and the on-money received by the assessee and therefore we are of the considered view that approval u/s. 153D of the Act has been taken only with regard to the observation of the AO about the issues arising out of the search but since there is no discussion about the unsecured loans issue nor any specific enquiry has been carried out by the AO during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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