TaxTMI 
TaxTMI 
2009 (1) TMI 343
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....,00,000/- (c). Shri Manish Kumar Bansal Rs. 1,00,000/- (d). Smt. Pushpa Devi Rs. 2,50,000/- (e). Smt. Rajni Jain Rs. 2,50,000/- (f). M/s. Devki Nandan Agarwal & Co. Rs. 2,00,000/- (g). Shri Narendra Kumar Agarwal Rs. 1,50,000/- (h). Shri Amit Kumar Bansal Rs. 1,50,000/- Total Rs. 17,50.000/- 3. The assessee is an individual and derives income from manufacture and export of shoes. It is 100% export oriented undertaking claiming relief Under Section 80HHC of the Act. The assessee filed a return of income. The assessee's return of income was subject matter of scrutiny Under Section 143(2) and an assessment Under Section 143(3) was framed by the Assessing Officer on 20.6.2005. The CIT acting Under Section 263 considered the said order passed by the AO as erroneous and also prejudicial to the interest of the Revenue so far as it relates to certain cash credits appearing in the books of account. According to the learned CIT, the AO has made no query about the sources of amount of loan in the hands of the creditors and creditworthiness of the creditors and also the source of the cash deposit immediately before the clearance of the cheque of the creditor as also the natu....
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.... his contentions. 6. I have gone through the records and also the impugned orders including the dissenting orders of the Division Bench, who have heard the appeal. In my view, the proceedings taken Under Section 263 of the Act cannot be justified having regard to the facts and circumstances of this case. In this case, the assessment record shows that the Assessing Officer issued a notice under Section 143(2) and 142(1) for the purpose of framing an assessment. He required the assessee to furnish the details of the confirmation of all the cash creditors at item No. 13 of the said notice and the assessee has filed the confirmation letters from all the cash creditors. He has also filed their affidavits and bank pass books. The details filed by the assessee shows that cash creditors wee assessed to tax and all this information is part of record. In the light of this information available in the assessment records, it cannot be said that the order of the Assessing Officer can be concidorod-s J erroneous and prejudicial to the interests of revenue. In fact, exactly the same situation was there before the Hon'ble Bombay High Court in the case of CIT v. Gabriel India Ltd. (supra) wher....
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....nue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on 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. There must be material available on record called for by the Commissioner to satisfy him, prima facie, that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy ii in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objective factors were available from the records called for and examined by s....
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....e Assessing Officer did not make any enquiry. It can only be said he did not reach the same conclusion as the Commissioner of Income-tax has done. Having regard to the facts and details that were there before him, he would have left with no other alternative but to definite conclusion that the cash credits deserve to be accepted. I, therefore, agree with the findings of the Id. Judicial Member. The matter will now go back to the Division Bench. DIVA SINGH, J.M. 1. This is an appeal, filed by the assessee against the order under Section 263 passed by the Commissioner of Income-tax-I, Agra dated 23-11-2006 for 2003-04 assessment on the following grounds: 1. That the Id. Commissioner of Income Tax-I, Agra has erred in law and on facts in assuming jurisdiction Under Section 263 of the income-tax Act. 1996 for the Assessment Year 2003-04 and consequently setting aside assessment order on certain issues. 2. That the Id. C.I.T.-I, Agra has erred in law and on facts in directing the Assessing Officer to complete the assessment after verifying the credit worthiness of the following creditors/loans: Rs. Smt. Madhy Rani Bansal 150000/- Smt. Anju Bansal 500000/- Shri Manish Kumar Ba....
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.... shown an increase in turnover, gross profit and net profit. The AO found these to be progressive. After test checking the book results, the disclosed results were not disturbed. 3. After calling forth the assessee to give detailed bifurcation of the bank interest, on a scrutiny of the profit and loss account, it was observed by the AO that the assessee has debited Rs. 58,96,068/- being the financial expenses. The AO considering the assessee's submission and the position of law held that interest received on FDR was not business income, as such not entitled for deduction Under Section 80HHC which is not an issue in the present appeal. Apart from that the AO considered car expenses, car depreciation, telephone expenses, festival expenses, donation etc. in order to make the addition. 4. On a perusal of the said order the CIT came to the conclusion that the assessment order passed on total income at Rs. 1,96,52,955/- as against returned income of Rs. 1,84,96,279/- was prima facie erroneous in so far as it is prejudicial to the interests of the Revenue for the reason that in the year under consideration following new loans had been shown. 1. Smt. Madhu Rani Bansal 11.02.2003 ....
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....ors and the same had been accepted only on the basis of papers filed by the assessee without making any effort to enquire about the genuineness of the transaction and credit worthiness of the creditors. 6. A perusal of page 3 and 4 of the impugned order-shows that the assessee was represented by his Chartered Accountant who appeared and filed written submissions. As per the impugned order it was submitted on behalf of the assessee that the AO during the course of the assessment proceedings besides raising queries has also required the assessee to furnish confirmations of all creditors,, date of loan, Permanent Account No. and the names of their AOs. 6.2 It was also stated that the assessee has already furnished all the requisite details along with the evidences explaining the genuineness and credit worthiness of the creditors which would show that the AO has accepted assessee's explanation after verification and examination before accepting the genuineness of the transaction and credit worthiness of the creditors. 6.3 It was also claimed and contended that all the creditors are assessed to tax and the transactions were made through account payee cheques and the respective am....
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....see it should be clearly mentioned on the confirmation. If cash creditor or loans are new, please furnish documentary evidence to prove its genuineness and also furnish evidence to prove the capacity/credit worthiness of the creditors. Please also furnish a list of squared up/cash credits with documentary evidence to prove the genuineness of these loans and to prove the capacity/credit worthiness of the creditors. 18. List of interest free loans taken or given in any name including his address. List of interest paid and given, rate of interest paid/charge to others & family members, interest paid and given, rate of interest paid/charge to others & family members. In response to this, attention was invited to reply furnished before the AO, photo copy of the same is placed at pages 3 to 6 of the paper book. So as to contend that due and necessary enquiries had been made by the AO at the stage of assessment. In response to the query made, confirmations of all the loans and all the other (sic) called for had been placed before the AO. These facts, it was submitted, had been agitated before the CIT also are accepted facts. The documents which had been placed before the AO, it was sub....
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..... Their Lordships therein took cognizance of the fact that writing an order in detail may be a legal requirement but the order not fulfilling these requirements cannot be said to be erroneous and prejudicial to the interests of the Revenue on this ground alone and it is for the Commissioner to reach to a conclusion that this order is erroneous and prejudicial to the interests of the Revenue. In the facts of the present case it was submitted that simply because the AO has not discussed this aspect in the assessment order and the assessee has led all necessary evidences of the fact that aspects were enquired into and examined by the AO non-discussion of the same in these peculiar facts in the Assessment Order it was argued does not make the order either erroneous nor prejudicial to the interests of the Revenue. In the facts of the case, it was argued, it is demonstrated that sufficient queries have been raised by them and the issue has been examined and the AO on the basis of the information available on record has been satisfied. As such the impugned order, it was submitted, deserves to be quashed. 11. Reliance was also placed upon CIT v. Arvind Jewellers (2002) 177 CTR (Guj) 546 :....
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.... same, we are of the view that in the admitted peculiar facts and circumstances of the case the impugned order deserves to be quashed. The assessee has demonstrated before us that sufficient and relevant enquiries were made by the AO in the course of the assessment. This aspect has not been disputed by the learned DR. We have also seen that the assessee has responded to these queries and has offered a detailed explanation to the AO supported by relevant documents. 14. A perusal of these pages contained from pages 7 to 65 would show that all these persons were income-tax assessees even in 2002-03 assessment year and the fact has not been faulted with by the Commissioner in the 263 proceedings. It is seen that in the facts of the case the AO on examination in regard to the source from which the assessee received the credits was satisfied, we do not think it fit and appropriate that the Commissioner in the exercise of his Revisionary powers was justified to hold that in such a case it was necessary to go to the source of the source. A perusal of the impugned order shows that Madhu Rani Bansal appeared before the Commissioner in response to summons issued Under Section 131. Her statem....
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.... from the money deposited from her independent business she also stated that the amounts representing the receipt of death claim of her husband from L.I.C. was also deposited in the same bank account. 17. Smt. Rajni Jain who advanced a loan of Rs. 2,50,000/-also submitted her income-tax return copy of which had been filed before the AO. Although she did not appear before the Commissioner in response to the summons, however copy of a bank account and return was filed. In the case of M/s Devaki Nandan Agarwal and Co. who advanced a loan of Rs. 2,00,000/- to the assessee, the creditor did not appear. However, the assessee relied upon the copy of account of the assessee existing in the books of the creditor i.e. M/s Devaki Nandan Agarwal and Co. certifying the amount of loan of Rs. 2,00,000/- on 22-1-2003. Accordingly the Commissioner having issued the summons which has not come back unserved and the existence of the creditor has not been doubted, no material has been brought on record to show how in these circumstances the assessee -, can be saddled with the burden that this was his own money. The documents relevant to this party are available at pages 59 to 61 would show that the sa....
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....qua the material available on record also stands unrebutted. However, the learned Commissioner did not agree with the conclusion of the AO being of the view that the creditors who were assessees in their own rights even in the preceding assessment year appeared before him and the one who could not appear filed confirmation, their identity as such has never been in doubt. The assessee as has been held in the case of Gauhati High Court if at the time of securing a loan in order to run his business is required to ascertain as to the source of the availability of the funds from which the creditors will give rise to a very strange and impossible situation. We are satisfied that the issue has been enquired into and has also been examined a possible and legal view has been taken and we do not think it fit and proper that the absence of discussion on the issue in the assessment order in these facts does not bad. The conclusion that it can be held to be erroneous and prejudicial to the interests of the Revenue. We have also taken into consideration the judgment of the Bombay High court in the case of CIT v. Gabrial India Ltd. and on facts hold the same to be fully applicable to the issue at....
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....no part of it was refunded to the clients. As such, mere fact of pendency of the Writ Petition was considered to be not a ground for claiming that the amount is not income of the assessee. In this background the Commissioner held that the A.O. had accepted the claim of the assessee without making proper enquiries. The said action was rightly found to be erroneous and prejudicial to the interests of the Revenue. However, the facts are not pari materia with the case at hand. In the facts of the present case, the necessary details were called for by the A.O. as has been seen by us and the evidences in regard to the same were placed by the assessee before the A.O. which fact has been demonstrated by the assessee and the fact that necessary details were called forth has been accepted by the department. The sources we find on record are adequately explained. As such, we are of the view that on the basis of material placed before the A.O. in the present case, we find ourselves unable to agree with the view canvassed by the department. As the Assessment Order has been passed after carrying out full and proper enquiries, we do not hold that for the reasons given in the impugned order it can....
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....d that the assessee has already furnished all the requisite details alongwith the evidences explaining the genuineness and creditworthiness of the creditors which the Assessing Officer ought to have examined the genuineness of transaction and creditworthiness of the creditors. It is further claimed that all the creditors are assessed to tax and transactions were made through account payee cheques and all the cheques were cleared from their respective bank accounts. The assessee has also filed affidavits of the creditors confirming the loans given by them. Vide this office letter dated 07.04.2006, the assessee was, however, required to produce the creditors. In spite of repeated adjournments the assessee did not produce any of the creditors. On his request and in order to assist him, the summons were issued to all the creditors. The loans which could not be explained by the assessee have been discussed by Id. CIT-I, Agra in his order as under: (i). Madhu Rani Bansal - Rs. 1,50,000/-: In response to summon under Section 131 from this office the creditor attended and her statement was recorded. From the papers filed by the assessee, it is seen that Smt. Madhu Rani Bansal has submi....
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....o accounts/documents are stated to have been maintained for the business of dalali. Further, he has sated that his annual income is between Rs. 28,000/- to 35,000/-. He has admitted his personal expenditure of Rs. 10,000/-. Therefore, it is not believable that after meetings his personal expenses, he could have deposited the cash of Rs. 50,000/- out of income earned of Rs. 35,000/- from dalali. Therefore, it is clear that he is filing return of income only to build up capital as income from business could not be established. Further, the fact of depositing cash of Rs. 50,000/- just before the lending of money to the assessee clearly shows that it is an accommodating entry in lieu of cash. (iv). Smt. Pushpa Devi - Rs. 2,50,000/-: As mentioned above, the creditor did not attend in response to the summon under Section 131 issued from this office. However, she has filed a written reply dated 20.11.2006 stating that she is engaged in the business^ of undergarments on job work basis. She had confirmed to have given a loan of Rs. 2,50,000/- to Shri Kulbir Singh vide cheque dated 06.02.2003. As regards the entry of similar amounts before giving cheque to the assessee, it is stated that....
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.....2002. He has stated that the ash was lying in his home and he is not able to explain the source of the same. From the copy of the acknowledgement of return filed during the course of proceedings under Section 263, it is seen that he has filed return showing an income of Rs. 9,505/-. He has stated that he income from business shown at Rs. 85,000/-'is from Dalali of Gold and Silver ornaments. The family of the creditor consisted of self, wife and two children of the age of 23 and 21 years. The creditor has admitted his annual household expenditure at Rs. 35,000/- to 36,000/-. It is not believable that a person earning Rs. 9,000/- can deposit a cash of Rs. 1,10,000/- in his bank account. From the bank account of the creditor it is also seen that a cash of Rs. 2,00,000/- was deposited on 02.06.2004 and on the same day it was given to someone as a loan through cheque. From the statement of the creditor and copy of bank account it appears that he is filing the return of income to build up his capital by showing a small amount of tax payable as no evidence with regard to the earning of income could be filed. He appears to be an entry giver in the form of cheque in lieu of cash receiv....
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....T vs. Pushpa Devi (1986) 56 CTR (Pat) 251 : (1987) 164 ITR 639 (Pat); (v) CIT vs. Smt. Rambha Devi (1987) 59 CTR (Pat) 1 : (1987) 164 ITR 658 (Pat); (vi) CIT vs. Belal Nisa (1988) 69 CTR (Pat) 170 : (1988) 171 ITR 643 (Pat); (vii) CIT vs. Smt. Kaushalaya Devi (1988) 171 ITR 686 (Pat); (viii) CIT vs. Pushpa Devi (1988) 70 CTR (Pat) 148 : (1988) 173 ITR 445 (Pat); (ix) Dawjee Dadabhoy & Co. vs. S.P. Jain (1957) 31 ITR 872 (Cal); (x) Addl. CIT vs. Mukur Corporation (1978) 111 ITR 312 (Guj); (xi) CIT vs. Gabrial India Ltd.; (xii) CIT vs. Smt. Minalben S. Parikh (1995) 129 CTR (Guj) 162 : (1995) 215 ITR 81, 86-87 (Guj); (xiii) Thalibai F. Jain vs. ITO (1975) 1975 CTR (Kar) 66 : (1975) 101 ITR 1, 6 (Kar); (xix) Bismillah Trading Co. vs. Intelligence Officer (2001) 248 ITR 292 (Ker). 5. The assessee's counsel Shri Mridul Pathak contends that there is no justification in the action of Id. Commissioner of Income-tax-I, Agra in terming the order to be erroneous and prejudicial to the interests of Revenue and directing the Assessing Officer to complete assessment after verifying the creditworthiness of the eight creditors as stated in the order dated 23.11.2006 passed....
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....#39;s counsel, I do not find any infirmity in the decision reached by the Id. Commissioner of Income tax-I, Agra in terming the assessment order dated 20.06.2005 to be erroneous in so far as it is prejudicial to the interest of Revenue and thereby directing the Assessing Officer to make further enquiries with respect to creditworthiness of credits appearing in the name of following eight persons: (a). Smt. Madhu Rani Bansal Rs. 1,50,000/- (b). Smt. Anju Bansal Rs. 5,00,000/- (c). Shri Manish Kumar Bansal Rs. 1,00,000/- (d). Smt. Pushpa Devi Rs. 2,50,000/- (e). Smt. Rajni Jain Rs. 2,50,000/- (f). M/s. Devki Nandan Agarwal & Co. Rs. 2,00,000/- (g). Shri Narendra Kumar Agarwal Rs. 1,50,000/- (h). Shri Amit Kumar Bansal Rs. 1,50,000/- Total Rs. 17,50,000/- 8. In these cases, the Assessing Officer after raising queries and receipt of information such as confirmations, bank accounts and Income-tax particulars with respect to the aforesaid credits appearing in appellant's books of account, did not make any enquiry to verify the correctness of information nor did he find out the creditworthiness and genuineness of the transactions entered by the appellant with them. ....
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....to have made any enquiry into the material that had come on record for satisfying himself about the creditworthiness of all these eight persons and as such, for lack of due and proper enquiry, which was necessary to be made, the order of assessment dated 20.06.2005 was rightly termed to be an erroneous order. The learned CIT-I, Agra himself also did not consider it proper to make such enquiries himself, but considered it proper that the enquiries with respect to creditworthiness of all such persons be made by the Assessing Officer and as such direction given by him also is necessary and proper in the case at hand. 9. The assessee's case that he had brought on record the requisite material on the basis of which the Assessing Officer took decision, does not persuade me to allow the ground in appeal particularly when the materials are there, it had become incumbent upon the Assessing Officer to enquire into the same. The furnishing of Income-tax file number was not enough to prove the creditworthiness of such credits. He could not have overlooked one or. the other material nor could he have undertaken half hearted enquiry and accepted the credits as genuine without further enquir....