TaxTMI 
TaxTMI 
2018 (6) TMI 1052
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....uction of a sum of Rs. 82.16 lacs in the capital account of the assessee and the other issue was of the receipt of Rs. 3.78 crores by an assessee by way of loan from his brother Suresh Galani. The Assessing Officer called upon the assessee to explain both these amounts during the assessment proceedings. The assessee responded by filing multiple replies and producing various documents. The Assessing Officer passed the order of assessment on 30.07.2004. In such order, the Assessing Officer appears to have discussed by speaking order only those areas where he proposed to make additions or disallowances. With respect to the above two controversial issues, the Assessing Officer made no additions. In other words, the Assessing Officer accepted the contentions of the assessee but without detail discussion in the order of assessment. 3. The Commissioner of Income Tax was, however, prima facie of the opinion that to the extent, the Assessing Officer failed to make the additions on these two issues, the order of assessment was erroneous and prejudicial to the interest of the Revenue. He, therefore, issued a notice seeking to take the order of assessment in revision in exercise of powers und....
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....er. Only after examining such material, the Assessing Officer was satisfied about the genuineness of introduction of the capital in accounts of the assesseee and all the unsecured loans received from his brother. He relied on certain decisions of various High Courts to which, reference would be made at a later stage. 8. Having thus noted the broad contours of the controversy, we may examine the materials on record more closely. We may recall, during the course of block assessment, the Assessing Officer noticed introduction of capital of Rs. 82.16 lacs and that the assesee had received unsecured loans to the extent of Rs. 3.28 crores from his brother. In response to the notices issued by the Assessing Officer in this respect, the assessee filed as many as five detailed replies. Relevant portion of such replies may be extracted. In the reply dated 06.05.2004 the assessee conveyed as under: "The Balance Sheet representing the statement of affairs as on 31st March, 2002 has been filed alongwith the Return of Income, as pointed out by your goodself in point No. 6. Further, the sources of funds have been from three sources viz. overdraft account with Indusind Bank, Loan from Shri Sure....
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....th respect to the third source of funds being the loans received from Shri Suresh Galani of Rs. 3,78,03,337.00 We would like to submit that Mr. Suresh Galani is the elder brother of the assessee. The funds have been received from time to time through his personal NRE Account (being a NRI). Further, some payments have also been remitted from abroad directly by Mr. Suresh Galani on behalf of our Assessee through approved banking channels. The loan has been accumulated over the period of years. Mr. Suresh Galani is a NRI residing in Dubai for past more than 25 years and is carrying Trading Business in Dubai. He is a high net worth individual having capacity to lend such loan to the Assessee. The copy of passport has been already filed as an evidence his identity and residential status. He also assessed to tax and covered in the Block Assessment with your honour. Further the State of Affairs carried on by Mr. Suresh Galani in India through his various NRE Bank Account are separately dealt in his block assessment proceedings. The confirmation of the loan given to the assessee is enclosed herewith. In respect of the loan received, as stated above we summarise that: a) Sure....
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....ents showing the status and standing of his brother Suresh Galani who was engaged in trading business in Dubai. 12. Along with reply dated 15.07.2004, the assessee produced his audited financial statement of M/s. Galani International, Dubai. 13. It was after such inquiries that the Assessing Officer passed the order of assessment in which, as noted above, he made no additions under these two heads. The Commissioner sought to revise this order for which he issued a notice dated 03.02.2006. His prima facie reasons for believing that the order of assessment was erroneous and prejudicial to the interest of the Revenue and therefore required to be revised were as under: "ii) That the loans of Rs. 1,31,51,028/- in the F.Y. 1998-99 of Rs. 45,53,640/- in F.Y. 1999-2000, of Rs. 46,50,979/- in the F.Y. 2000-01 and of Rs. 1,55,60,690/- in the F.Y. 2001-02 credited in the name of Shri Suresh Galani, your elder brother, were accepted as genuine. From a perusal of the material on record, it emerges that you did not file any collateral documentary evidence in support of the genuineness of these transactions. The onus lay upon you to establish the identity and capacity of the creditor as also ....
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.... final order that the Commissioner passed, he held that the Assessing Officer did not make any inquiry to ascertain whether the funds shown to have been remitted from UAE were genuinely remitted from that country or it was a case that foreign currency was purchased by the assessee either from grey market in India or in UAE out of his unaccounted income earned in India and then deposited in NRE account or in the account of his brother. He was also of the opinion that the Assessing Officer did not make any attempt to find out by making proper inquiries whether the funds were remitted by the assessee out of his and his brother's income or it was the case of hawala transactions. He noted that the assessee had not filed either befroe the Assessing Officer or before himself the copies of authenticated bank account of his brother from where the said two funds were transferred or remitted to India which are eventually credited in the assessee's accounts. He therefore directed the Assessing Officer to carry out fresh assessment during which, the AO would insist on the assessee filing the authenticated copy of his own bank account and the bank account of his brother. 15. The scope o....
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....s, or incorrect application of law, without due application of mind or without following the principles of natural justice are not beyond the scope of section 263 of the Act. " 18. In case of Commissioner of Income Tax vs. Arvind Jewellers reported in 259 ITR 502 Division Bench of this Court referring to the judgement of Supreme Court in case of Malabar Industrial Co. Ltd vs. CIT reported in [243 ITR 83 observed as under: "6. From the above observations made by the Supreme Court, it is clear that the provisions of Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Supreme Court has also made it clear that the phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. It was further emp....