AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 1076
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....ries and finding a reasonable view on the issues, the order of assessment dated 24.3.2015 cannot be regarded as erroneous in as much as prejudicial to the interest of revenue merely because ld. CIT held a different opinion on the scope of such enquiries. 1.3 That ld. CIT also failed to appreciate that, u/s 263 of the Act, an order of assessment Cannot be set-aside to AO to simply to make further enquiries and thereafter pass fresh order of assessment. Therefore, and as such, impugned order and directions issued u/s 263 are untenable, contrary to law unsustainable. 1.4 On the facts and in the circumstances of the case, the Ld. Commissioner has erred in treating the assessment order as erroneous and prejudicial to the interest of the Revenue on an issue which has been considered, examined and investigated upon during the assessment both by the assessing officer and also by the JCIT while giving his directions u/s 144A- 2.NO JUSTIFICATION EITHER IN LAW OR ON FACTS AND THE GROSS ILLGALITY DONE BY THE Ld. CIT IN SETTING ASIDE THE ORDER DATED 24/3/2015 PASSED BY THE JCIT U/S 144A. 2.1 That the Ld. CIT has simply set-aside the order dated 24/3/2015 pass....
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....tors. 2. The effective ground in this appeal is against the legality and justification of the order dated 30.03.2017 of invoking the provisions of u/s 263 of the Income Tax Act, 1961 hereinafter refer to as the Act, thereby revising the assessment order. 3. By way of this present appeal assessee has challenged correctness and legality of the impugned order passed u/s 263 of the Act. 4. The facts giving rise to present appeal are that a survey operation u/s 133A of the Act was carried out at the business premises of M/s Bhandari Hospital & Research Centre on 23.09.2011. During the course of survey undisclosed income amounting to Rs. 31,24,41,685/- was surrendered by the assessee through its partners under different heads. Out of the surrendered amount of Rs. 31,24,41,685/-, the amount of Rs. 23,61,18,930/- was surrendered in the hands of the assessee firm under various heads as details below: Sr. No. Name of the assessee Surrendered Amount (In Rs.) Heads 1 M/s Bhandari Hospital & Research Centre (As per statement dated 24.09.11 of partner Shri Vinod Bhandari - on account of Hundites 16,65,00,000/- On account of Hundies 2 M/s Bhandari Hospital &....
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....4.09.11 of partner shri Vinod Bhandari- on account of bogus unsecured loans) 51,16,920/- 51,16,920/- 5. Thereafter the case was selected for scrutiny and assessment u/s 143(3) was completed on 24.03.2015 thereby the assessing officer assessed income at Rs. 1,02,63,070/- for the year under appeal. Subsequently, Ld. Pr. CIT after examining of records issued a show cause notice dated 15.01.2015 u/s 263 of the Act calling upon assessee as to why the assessment so framed should not be revised. The relevant contents of the notice dated 15.03.2017 which is reproduced by the Ld. Pr. CIT in his order are as under: 3.The relevant portion of the show cause notice u/s 263 is reproduced as under :- A. During the survey on 24.09.201 surrender of income was made as under :- (a) Cash reception per LP-02 6,45,02,010/-A (b) Unsecured Credit u/s 41(1) 51,16,920/- (c) Loans against Hundi 16,65,00,000/- " Total 23,61,18,930/- Then by filing an affidavit on 19.01.2012, the assessee has revised cash receipts to Rs. 6,21,25,1151- and claimed telescoping of this amount against Hundi Loans. So the amount offered was (a) Cas....
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....ncluded the undisclosed income surrendered under various heads totaling to Rs. 17,17,49,505 1- in the P& L Account itself thereby creating misleading picture of increase in the net profit as compared to the last years. If the surrendered income as well as the deduction claimed u/s 35 AC are excluded the book results would show a net loss of Rs. 5,52,61,171 1- on the total receipts of 20,39,86,311/-. The picture for last 3 years emerging there from is as under :- A.Y. 2010-11 2011-12 2012-13 including income surrendered in survey 2012-13 excluding income surrendered in survey Total re (A) 7,26,93,557/- 10,58,25,873/- 37,57,35,816/- 203986311/- Other In (B) 13,94,454/- 26,15,512/- 1,72,96,872/- 1,72,96,872/- Total expenses 5,16,21,278/- 10,08,49,216/- 31,24,58,762/- 23,24,58,762/- (excluding Rs. 8Cr.) Depreciation 1,15,11,494/- 2,11,23,096/- 4,40,85,592/- 4,40,85,592/- Profit before remuneration and intere to the partners 1,09,55,23 (1,35,30,926/-) 3,64,88,3341- (5,52,61,171/-) Profit after excluding other income & depreciation (O)={A-B+C} 2,10,72,27 49,76,658/- 6,....
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....by the AO without any enquiry. L. the AO has allowed salary paid amounting to Rs. 4,75,90,791/- without verifying whether TDS as per provisions of the Income Tax was made or not." 7. In response thereto, the assessee filed its objections against invoking the provisions in the form of written submissions the Ld. Authorised Representative had also made oral arguments against invoking the provisions of Section 263 of the Act Ld. Pr. CIT. However, Ld. Pr. CIT was not satisfied with the submissions and proceeded to revise the assessment order. Hence, the Ld. Pr. CIT set aside the original order passed by the Assessing Officer by observing as under: 20. On perusal of record, it is clear that the enquiry and investigation which were required had not examined properly by the Assessing Officer. In this regard, Explanation-2 of the section 263 is produced as under :- "For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner (a) The order is pa....
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....mpt of avoid incidence of taxation. ii. Reply in response to summons u/s 131 was filed by the assessee on 3.1.2014 (page 84-106 of paper book) and it was submitted that out of surrendered amount of Rs. 23,37,49,505 only an amount of Rs. 6,20,00,000 has not been offered for tax as the same has been claimed as telescoping against Hundi loans. It was submitted that the income from Hospital receipts has been used to make Hundis' and since income of Rs. 6,21,32,585 is already offered for tax as undisclosed receipts and since the same income which has been used to make Hundis therefore Hundis' of Rs. 6,21,32,585 cannot be taxed again and thus the surrendered Hundi's have been reduced by Rs. 6,21,32,585. The ledger accounts of all the Hundis' and their realisation were filed with the letter dated 3.1.2014. iii. The assessee further submitted a comparison chart of expenses for three years (pg 86 to 90 of paper book) explaining all expenses as % of gross receipts and giving detailed notes in cases of variations. iv. The assessee also filed the details of donation given to Gitanjali University Trust which was claimed u/s 35AC. The relevant Forms no. 58A pr....
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....tilization as per the approval of National Committee u/s 35AC. The IT Return of M/s Gitanjali University for AY 2011-12 was placed (on page no. 273-282 of the paper book) with the audited final accounts. The PAN card of the said university (on page 282 of the paper book)was placed on record. The certificate of receipt of donation issued by the said University (on page 284 of the paper book) was also placed. The bank statement of the said university (on page 285- 286 of the paper book) was also placed on record. A letter dated 12.1.2012 issued by the said university requesting for donation and acknowledgement thereof (on page 287-288 of the paper book) was also placed on record. The IT certificate issued by Government of India Ministry of Finance on 16.6.2011 in favour of Gitanjali University authorizing receipt of donations u/s 35AC (on page 290-293 of paper book) was also filed. Notification dated 14.6.2011 issued by GOI Ministry of finance u/s 35AC (page 297 of the paper book) was also placed on record. xiv. On 18/2/2015 reply was filed (page 551-552 of the paper book) by the assessee explaining the reasons for paying donation to Gitanjai University trust. ....
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.... xxii. The AO passed the order u/s 143(3) following the directions of JCIT and the documents on record and allowed set-off of Rs. 62125115 from the hundi loans and also allowed deduction u/s 35AC of Rs. 8 crore. xxiii. In these circumstances the order passed u/s 143(3) was after due enquiry, verification and based on applicable decisions and direction of JCIT u/s 144A. The reason for reducing the addition from 6,45,02,010 to Rs. 6,21,25,115 was also considered by the JCIT( page 91 of the paper book is the seized paper showing the undisclosed receipts and expenses therefrom) Such an order cannot be said to be erroneous or prejudicial to the interest of revenue merely because the CIT was enquiry to be further conducted as per his wises and his satisfaction. B. Whether the order of the AO and JCIT was not in accordance with law. ? 1. Due verification was done as is evident from the sequence extracted in point A above. 2. The reduction of 6,45,02,010 by 23,76,985 was evident from the seized page (placed on page 93 of paper book) itself which contained both debit and credit entries and thus the debit of Rs. 23,76,985 on that page was reduced f....
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....receipts the surrendered Hospital receipts of Rs. 6.21 crores surrendered as current year income during survey. This Income was acknowledged on the basis of documents seized as business Income / receipts for the current year and should have been added to the Hospital receipts for computing the ratios. If this Income is considered as part of the total Hospital receipts then the position would be as under:- A.Y. 2010-11 2011-12 2012-13 including ;, Income surrendered in survey 2012-13, After excluding surrendered Income other than surrendered Hospital receipts in the total receipts) Total receipts (A) 7,26,93,557 1,05,82,587 37,57,35,816 26,61,18,896 Other Income (B) 13,94,454 26,15,512 1,72,96,872 1,72,96,872 Total Expenses 5,16,21,278 10,08,49,216 31,24,58,762 23,24,58,762 Depreciation (C) 1,15,11,494 2,11,23,096 4,40,85,592 4,40,85,592 Profit before remuneration and interest to the partners 1,09,55,238 -1,35,30,926 3,64,88,334 68,71,414 Profit after excluding other income & depreciation (D)={A-B+C} 2,10,72,278 49,76,658 6,32,77,054 3,36,60,134 Profit ratio (D/A) 28.99% ....
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.... not record any categorical finding the the depreciation is 15% and not 40% which is a prerequisite to send the matter back to the AO. Judicial precedents relied upon by the assessee to show that the order u/s 263 deserves to be quashed.: Reliance is placed on the following decisions (copies being filed):- a. Cadila Pharmacuticals ltd. v. PCIT (ITA no. 1190/Ahd/2015 (placed on pg 1 to 10 of paper book of decisions) b. Madhusudhan Industries Ltd. v. CIT Ahd-II (ITA no. 853/Ahd/2013 placed on pg 13 to 22 of paper book of decisions) c. (2017) 30 ITJ 335 (MP) PCIT v. Narayan Balmukund Dubey (placed at page no. 23 to 35 of paper book of decisions) d. (2013) 357 ITR 388( Delhi) DIT v. Jyoti Foundation (placed at page no. 36 to 43 of paper book of decisions) e. (2004) 270 ITR 157 (MP) CIT v. Mahrotra Bros (placed at page no. 43 to 44 of paper book of decisions) f. (2010) 344 ITR 554 (Delhi) CIT v. International Travel House (placed at page no. 45 to 51 of paper book of decisions) g. (2012) 343 ITR 329 (Delhi) ITO v. DG Housing Projects ltd. (placed at page no. 52 to 59 of paper book of decisions) h. M/s Amira....
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....urses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the AO is unsustainable in law and the same is found to be passed without application of mind. 4.2 Further, placing reliance on the decision of the Hon'ble Gujrat High Court in the case of CIT Vs. Arvind Jewellers (259 ITR 502) the appellant submits that where the relevant material was on record which was duly considered by the AO and a reasonable and sustainable view was taken then merely because different view can be taken, should not have been the basis for invoking the revisionary powers under the section 263 of the Act. The appellant further contends that when a regular assessment is made u/s 143(3) of the Act, a presumption must be drawn that the order has been passed upon an application of mind and the Commissioner has to rebut such presumption with the support of some cogent material to show that the AO had not applied his mind while passing the assessment order. That where the AO adopts ....
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..... (295 ITR 282) wherein it was held that since different views existed on the day when the Commissioner passed the order and the mechanics of that section had become so complicated over the years, the subsequent amendment of section 80 HHC of the Act, even though retrospective, would not be attracted. In this case Hon'ble Apex Court, referring and reiterating the ratio laid down in its earlier order in the case of Malabar Industries Ltd. (243 ITR 83), has held that where two views are possible and the AO has taken one view in the assessment order with which the commissioner does not agree, then the same cannot be termed as an erroneous order prejudicial to the interest of revenue unless the view taken by the AO is "unsustainable"in law. 4.5 The appellant further relies on the judgment of Hon'ble Delhi High Court in the case of CIT vs. DLF Ltd. (2013) 350 ITR 555 (Delhi), decision of Hon'ble Andhra Pradesh High Court in the case of Spectra shares and Scrips Pvt. Ltd. (2013) 354 ITR 35(AP) and decision of Hon'ble Calcutta High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (cal.) and submitted that there should be an essential element of "unsustai....
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.... 4.9. In the present case, the AO has raised a number of queries regarding the issues now sought to be revised by the CIT which were replied by the assessee through detailed submissions supported by relevant documents and other evidence coupled with legal propositions and decisions. It is also pertinent to note that the AO has passed a detailed order / note sheet entry while dealing and adjudication the issues. There must be some prima facie material on the record to show that the order is unsustainable in law and the tax which was legally eligible has not been imposed. The present case is neither a case of "no enquiry"nor is a case where the AO, failed to make necessary enquiry and the assessment order was passed after making detailed inquiry and application of mind. 4.10 The appellant also relies on the ratio of the decision of Hon'ble High Court of Delhi in the case of CIT vs. DLF Ltd. (2013) 350 ITR 555 (Delhi) and submits that it is not mere prejudice to the Revenue or a mere erroneous view which can be revised u/s 263 of the Act but also there should be the element of "unsustainability"in the order of the assessing officer, which empowers the commissioner to issu....
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....dering the material and explanations, the Income-tax Officer had come to a definite conclusion. Since the material was there on record and the said material was considered by the Income-tax Officer and a particular view was taken, the mere fact that different view can be taken should not be the basis for an action under section 263. The order of revision was not justified." Hence, as per the preposition and ratio laid down by Hon'ble Gujarat High Court is that when the assessee had produced relevant material and offered explanation in pursuance of notices u/s 143(2) and 142(1) of the Act and after considering the material and explanations, the AO had come to a definite conclusion. Their Lordship further held that in this situation, since the material was there on record and the said material was considered by the AO and a particular view was taken, the mere fact that a different view can be taken should not be the basis for a valid action u/s 263 of the Act and therefore, dismissing the appeal of the revenue the Hon'ble High Court held that the order u/s 263 of the Act was not justified and valid. 4.12. The appellant also relies on the preposition laid by High Cou....
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....a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is no....
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....e AO and should be examined at the time of assessment then it was held that the order of revision u/s 263 of the Act was not valid. 4.15. The appellant further relies on the decision of High Court of Delhi in the case of CIT vs. Hotz Industries Ltd. (2014) 49 Taxmann. Com.267 (Delhi) and contends that once inquiries were conducted and a decision was recorded by the AO, it cannot be said that it was a case of "no inquiry"and the commissioner must reach to a finding that the finding recorded by the AO was erroneous, not because no inquiries were conducted, but because final conclusion in the assessment order was wrong and untenable or unsustainable in law. The relevant operative para of this order is reads as follows : "Commissioner in the order under Section 263 did not go into the said question on merits, but observed that the "Assessing Officer it appears"ad not caused any inquiries or investigation, but accepted the contention of the assessee. Commissioner observed, "therefore, meaningful inquiry should be conducted". This does not meet the requirement that the decision of the Assessing Officer should be erroneous. Once inquiries were conducted and a decision wa....
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....of closing stock. This conclusion of A.O is not absurd or erroneous. Therefore, the exercise of Jurisdiction uls.263 of the Act by Id. Pro CIT fails. The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT reported at (2000) 243 ITR 83 (SC) has held that the CIT has to be satisfied of twin conditions, namely, (i) the order of the A a sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent, if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue, recourse cannot be had to s.263(1). Para 4.2. It is not pointed out by the Id. Pr.CIT as to what prejudice has caused to the Revenue. In the absence of specific finding by the ITA No.11901Ahd12015 Cadila Pharmaceuticals Ltd. vs. Pr.CIT Asst. Year- 2009-10 - 10 -ld.Pr.CIT, we cannot confirm his order revising the assessment order. Therefore, in our considered view twin conditions as laid down in Section 263 of the Act, i. e. order being erroneous so far it is prejudicial to the interest of Revenue are not satisfied. Under these facts, we are unable to sustain the find....
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....ssumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." 6.2. In the present case, the Revenue has been accepting the claim of the assessee, the income earned by way of interest income as a business income. It is not stated by the ld.CIT as to how the stand taken by the Revenue for earlier years was not correct and the AO taking a consistent view and order so passed was erroneous. We find that ld.CIT has not exercised his jurisdiction u/s.263 of the Act in accordance with the settled principle of law. Ld.CIT has failed to ITA No.853/Ahd/2013 Madhusudan Industries Ltd. vs. CIT-II Asst.Year - 2008-09 consider the submissions of the assessee on both the aspects and has merely based its order on the basis that the AO has not made any enquiry. However, it is transpired from the records that the AO has, in fact, made enquiry and issued questionnaire to the assessee and in response to the questionnaire, the assessee has submitted that the interest income has been treated as "busine....
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....n reply thereof. The AO has applied his mind under the facts and circumstances, therefore the assessment order is not vitiated on the ground that the order is erroneous and prejudicial to the interests of the Revenue, because no enquiry has been done. Therefore, the impugned order is hereby quashed being unjustified. In the case of Pr. CIT vs. Narayan Balmukund Dubey (2017) 30 ITJ 335(MP) Hon'ble jurisdictional High Court held that Para 7. The aforesaid finding of facts arrived at bye' establishes that there is a proper enquiry conducted assessing officer and it is not a case where no enquiry a conducted by the assessing officer. Not only this, the assessee has furnished all the requisite information to the Income Tax Officer and considering all the facts, the assessment was completed. i) Para 8. This Court in the case of Commissioner, Income Tax Vs. Ratlam Coal Ash Co., reported in 171 ITR 141 of Madhya Pradesh in paragraph Nos.2 and 3 has held as under:- 2. The material facts giving rise to this reference, briefly, are as follows: a On examination of the income-tax record of the assessee, the Commissioner of Income-tax found that in the return f....
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....making a reference but that application was rejected. The Revenue thereupon submitted an application under Section 256(2) of the Act before this court which was allowed. That is how the aforesaid question of law has been referred to this court for its opinion. 3. Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative and in favour of the assessee. It is well settled that where the Income-tax Officer made the assessment in undue hurry, accepting what the assessee stated in the return without making any enquiries, in the circumstances of the case, the Commissioner would be justified in holding the order of the Income-tax Officer to be erroneous. In the instant case, however, Tribunal has found that the assessee had furnished all the requisite information and that the income tax officer considering all the facts had completed the assessment. The tribunal further held that in the circumstances of the case, it could not be held that the income tax officer had made the assessment without making proper enquiries. In view of these finding findings, the Tribunal, in our opinion, was justified in law in re....
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....ground that the Assessing Officer did not make proper enquiry is not valid (CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP)). The assessee furnished GIR/PAN number, address, confirmation from the creditors, the assessee has discharged the burden to prove the genuineness of parties and transaction in addition to the capacity satisfactorily as such there is no ground for addition (Addl. CIT v. Hanuman Agarwal [1985] 151 ITR 150 (Patna)). In this regard the Department also has not brought any material to disprove the genuineness of the parties, capacity of the lenders and transactions on the basis of cogent facts on record. The hon'ble Supreme Court in the case of CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (headnote) : 'Held, that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to fi....
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....terest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. M/s Amira Pure Foods Pvt. ltd. v Pr. CIT central Gurgaon Hon'ble Tribunal held that The ld PCIT has not referred to Explanation 2 of section 263 of the Act which has been inserted with effect from 01.06.2015 however we agree with the finding of the coordinate bench in the case of Narayan Tatu Rane (supra), wherein it has been held that Explanation cannot said to have overridden the law as interpreted by the various High Courts, where the High Courts have held that before reaching a conclusion that the order of the AO is erroneous and prejudi....
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.... prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon'ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd Vs. ITO (1977)(106 ITR 1) that there must be a point of finality in all legal proceedings and the stale issues should not be reactivated beyond a particular stage and the lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of....
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....The A.O. had failed even to consider and examine the documents impounded during survey u/s 133A of IT Act which is evident from the fact that an amount of Rs. 1,96,900/- on account of angiography was not at all taken in to account while passing the order. (5) The A.O. has failed to make analysis of year wise investment. Further the A.O. has failed to note and bring on record that after the surrendered income and deduction u/s 35AC are excluded, there will be net loss of 5.52 crores as analyzed b CIT at page 2 of order U/S 263 of IT Act. The gross manipulation in the profits after and before survey was lost sight by A.O. which necessitated CIT -1 to invoke section 263 of IT Act. (6) I request Hon'ble members to take note of queries raised at 1 to K of show cause which mandated the A.O. to conduct proper inquiries before completing the assessment order. (7) It is also borne out of record that the A.O. has simply accepted the reply of appellant dated 23.02.2012 without verifying and further examining the contentions raised therein. (8) The rebuttal of A.O. of the contents of affidavits dated 19.01.2012 retracting the part of surrendered income n....
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....of Income-tax v. Mahavar Traders 220 ITR 167 (Madhya Pradesh) 9. Smt. Renu Gupta v. Commissioner of Income-tax 301 ITR 45 (Rajasthan) 10. PT. Lashkari Ram v. Commissioner of Income-tax 272 ITR 309 (Allahabad) 11 Commissioner of Income-tax, Patiala v. Himachal Pradesh Financial Corpn. 186 Taxman 105 (Himachal. Pradesh) 12 Commissioner of income tax V/s Prafulla C.Pant And Dharam Veer JJ 176 Taxman 184 (Uttrakhand) 13 Mofussil Warehouse & Trading Co. Ltd.V/s Commissioner Of Income tax 238 ITR 867 (Madras) 14 Durgalal & Co. Vis Commissioner Of Income tax 220 ITR 456 (Delhi) 15 Commissioner of Income tax Vis Active Traders (P) Ltd. 214 ITR583 (Calcutta) 16 Add1.Commissioner Of Income tax Vis Mukur Corporation III ITR 312 (Gujarat) 2. Further reliance is here by placed or following decisions of Supreme Court, High Courts and Tribunal, the list and gist of decisions are submitted now. 1 CIT V/s Amitabh Bachan Civil Appeal No. 5009 of 2016 2 CIT V/s Bhagwan Das 272 ITR 367 (Allahabad) 3 Shubhlakshmi Vanijya (P) Ltd. V/s CIT-1 172 TTJ 721 (Kalkata) 4 Jublee Commo....
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....e for consideration. It was evident from the order of the High Court that the findings recorded by the Tribunal that the appellant stopped agricultural operation in November 1982 and the receipt under consideration did not relate to any agricultural operation carried on by the appellant, were not questioned before it Thought the High Court was not correct in holding that the amount was paid for breach of contract as indeed it was paid in modification/relaxation of the terms of the contract, it was to be held that the High Court was justified in concluding that the said amount was a taxable receipt under the head 'Income from other sources'. 4. In a recent decision of Hon 'ble Apex court in the case Shri Amitabh Bachan, (CIVIL APPEAL NO.5009 OF 2016 [Arising out of S.L.P.(C) No.11621 of 2009]) while dealing with issue of requirement of issuing specific notice u/s 263 of LT. Act, has comprehensively dealt with this issue of "lack of inquiry"and "inadequate inquiry"by the A.O. and held that CIT was perfectly justified in invoking section 263 of Income Tax Act when A.O. had dropped the inquiries once the additional expenses claimed in the revised ROI were withdrawn....
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....preceded and for the reasons alluded we are of the opinion that the present is a fit case for exercise of the suo motu revisional powers of the learned CLT under Section 263 of the Act. The order of the learned CLT., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High 23 Court dated 7th August, 2008 are set aside. The appeal of the Revenue is allowed. 5.In the case of Rampyari Devi Saraogi, Hon'ble Supreme court, (67 ITR 84 SC) held that CIT was justified in invoking section 263 of LT. Act 1961 as the ITO had accepted the initial capital. Ornaments and presents received at the time of marriage and other gifts from father-in-law without making any inquiry. Further it was held that it was not necessary to further detail the reasons given by the CIT because on the facts of record, the orders were prejudicial to the interest of revenue. The decision of Hon'ble High Court dismissing the WP filed by the assessee against the order of CIT was dismissed. The relevant part of decision is as under.- The High Court was right in overruling the contention of the assessee. The order of the Commissioner was a detailed order. There....
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....o the ITO whether he had jurisdiction or not and whether the income assessed in the assessment orders which were originally passed was correct or not. The appeal was liable to be dismissed and decision of High Court was to be affirmed. 6.The jurisdictional MP High Court, in the case of Mahaver Trader, (220 ITR 167 Madhya Pradesh) while setting aside the order of IT AT held that ITO had not examined the issue of allowability of deduction us 80HH and 80J in the light of conditions laid down for grant of relief under said sections. Further, it was observed by the Hon'ble court that the Tribunal instead of approaching the matter in the proper perspective had on their own started making enquiries and found that order passed by A.a. was correct which was not warranted at all. The operative part of decision is reproduced here under:- Tribunal, instead of approaching the matter in the proper perspective, have on their own started making enquiries and found that the order passed by the Income-tax Officer is correct This approach of the Tribunal was not warranted at all, After going through the order of the Income-tax Officer, it appears that the Income-tax Off....
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....ery slipshod manner, as is clear from the post script in the order of the Assessing Officer. The Assessing Officer accepted the version of the assessee without proper enquiry and as a result a substantial amount of taxable income was not brought to tax. In such a case the assessment order would be erroneous and prejudicial to the interests of the Revenue because law enjoins upon the Assessing Officer to make the assessment order bringing all taxable income to tax. The enquiry held in a perfunctory manner could not be said to be a proper enquiry before passing the assessment order. This cannot be a ground to shut out the jurisdiction of the Commissioner of Income-tax that an adequate enquiry was conducted by the Assessing Officer. We may clarify that the order of the Commissioner of In come-tax is in two parts. Part one consists of reasons for issuing the show-cause notice, and the later part deals with findings recorded by the Commissioner after affording opportunity of hearing to the assessee. As stated above, the Commissioner of Income-tax has recorded a categorical finding that the order of the Assessing Officer for want of adequate enquiry, was erroneous and prejudicia....
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..../147 of the Income Tax Act is erroneous and also prejudicial to the interest of the revenue? Both the above mentioned question were answered in affirmative by Hon'ble Court and held as under:- "The assessee with an authorised share capital of &.1.36 crores raised nearly a sum of Rs. 32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees is an important pointer necessitating investigation. Money allegedly received on account of share application can be roped in under Section 68of the Income Tax Act if the source of the receipt is not satisfactorily established by the assessee. Reference in this regard may be made to the judgment in the case of Sumati Dayal -Vs- CIT (supra) wherein Their Lordships held that any sum "found credited in the books of the assessee for any previous year, the same may be charged to income tax.... ". We are unable to accept the submission that any further investigation is futile 'because the money was received on capital account: The Special Bench in the case of Sophia Finance Ltd. (supra) opined that "the use of the words "any sum found credited in t....
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....rder passed by the Commissioner is by no means an act of substituting his own views to that of the assessing officer. It is true that the assessing officer had requisitioned the necessary details by his notice u/s.142(1) but he thereafter did not apply his mind thereto. The judgment in the case of J. L. Morrison (India) Ltd. has no manner of application because in that case the question essentially was whether the receipt was of a capital or revenue nature. The facts and circumstances were not in dispute. Moreover the view taken by the assessing officer was not shown nor was held by the Court to be an erroneous view. Whereas in this case we have demonstrated in some detail as to why is the order of the assessing officer erroneous and prejudicial to the revenue. " 9. The High Court of Allahabad, in the case of Bhagwan Das (272 ITR 367- Allahabad) has held that where the A.O. has not examined the agricultural income and its exemption, the order has been passed without application of mind and when there was no discussion of relevant issue in the assessment order, the CIT was held justified in setting aside the order of A.O. for granting exemption to the assessee with....
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....ssment ordering so far as it grant ed exemption to income from Agriculture and Poultry farming was not erroneous or prejudicial to the interest of Revenue. We, therefore, answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. Since nobody has put in appearance on behalf of the assessee, there shall be no order as to costs. 10. In case of Bhushan Steel, Hon'ble ITAT A Bench Delhi, (ITA No 1641 to 1646IDelJ2014) observed that CIT was within hi powers to set aside the order of A.O. where, the A.O. had allowed the expenses debited to P & L account without proper inquiries although during the course of search in Bhushan group and survey in other cases, it was noticed that Bhushan group has been inflating expenses and various parties were used for the said purpose. It has been held as under:- In view of foregoing discussions, we are inclined to hold that the present case is squarely covered in favour of the revenue by the decisions of Hon 'ble Jurisdictional High Court of Delhi in the case of Gee Vee Enterprises vs ACIT (supra) and CIT vs Nagesh Knitwears P. Ltd. (supra) as in the present case, the AO did not....
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....le to be taxed can claim no immunity because the Assessing Officer (Income Tax Officer) has taxed the said income in the hands of another person contrary to law."ITA No. 1641 to 16461Del12014 AY: 2006-07 to 2010-11. Therefore, it is well-settled principle that the Revenue authorities are duty bound to tax right person and right person alone. By "right person"is meant the person who is liable to be taxed, according to law, with respect to a particular income. The meaning of "wrong person"is obviously used as the opposite of the expression "right person". In our humble understanding, the ratio of this decision clarifies that merely because of a.. wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. Same is the case here when assessee company made a bogus claim of expenditure then the assessee cannot avail immunity from tax liability by stating that the impugned amount of expenditure claim has been taxed in the hands of respective payee companies 11. In a landmark decision in the case of Subhlakshmi Vanijya (P) Ltd. B Bench of Kalkata ITAT. (60 taxmann.com 60 (Kolkata - Trib.), th....
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.... coincidence that hundreds of companies brought into existence, having link with each other and none of them doing any worthwhile business activity, come together to issue shares at such a huge premium. At best, this argument could have been taken into consideration if these companies had issued shares to its related companies at premium and invested the proceeds in some other business activity and not purchasing the shares of other related companies through such a circular route. This shows that the transactions of issuing shares at a premium to related companies and then purchasing the shares of other related companies at a huge market price and none of the companies has any worthwhile business activity, when considered on an overall basis, is nothing but a smokescreen. [Para 17.] There remains no doubt whatsoever that in the given circumstances, the Assessing Officer conducted half-baked enquiry ignoring vital aspects which were required to be examined. If a company recently incorporated without carrying out any worthwhile business activity issues shares with face value of Rs. 10 at a premium of Rs. 190, the immediate concern of the Assessing Officer ought to have been ....
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....re before finalizing the assessment It is only thereafter that the revisional powers of the Commissioner under section 263 can come into play for ascertaining if the Assessing Officer examined all the relevant points, which ought to have been examined. If the Commissioner, on examination of records of assessment, comes to the conclusion that the Assessing Officer failed to enquire into certain other relevant aspects which, in fact, necessitated thorough investigation, then he has all the power to revise the assessment order. In the instant case, the assessment already stands finalized and now the Commissioner is examining whether the Assessing Officer properly examined the facts of the case. In such circumstances, it is impermissible to have a recourse to the provisions of sections 142(1) and 143(2) for demolishing the order under section 263. [Para 18.b.J Whether inadequate inquiry conducted by the Assessing Officer empowers the Commissioner to revise the assessment order? It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different ....
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....re the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of sect ion 263. [Para 21.g.1 From an overview of the above discussed judgments, it is crystal clear that where the AO fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, the CIT is empowered to set aside the assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, it is not further required on the part of the CIT to expressly show where the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of section 263. We, therefore, answer all the five aspects discussed above by holding that : i) the enquiry conducted by the AO in such cases can't be construed as a proper enquiry; ii) CIT u/s 263 can set aside the assessment order and direct the AO to conduct a thorough enquiry, notwithstanding the jurisdiction of the AO in making enquiries on ....
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....he Ld. Counsel for the assessee, the CIT ought to have set aside the order of the AO and directed the AO to conduct fresh enquiry on the lines indicated in the order of this Tribunal in the case of Subhlakshmi Vanijya Pvt Ltd. (supra). We therefore modify the order of CIT and direct the AD to make fresh enquiry with regard to the receipt of share capital and share premium during the previous year after affording Assessee opportunity of being heard. With these observations the appeal of the assessee is treated as partly allowed. 13. The jurisdictional Indore Bench of ITAT, in a recent decision dated 21.11.2016, in the cases of (1) P.G. Infrastructure & Service Pvt. Ltd. Bhopal, (2) S.N. Vijaywargiya, Bhopal, (3) People's International Services P. Ltd., Bhopal, (ITA No. 607 to 609/Ind/2016) has confirmed the order of PCIT, Bhopal passed under section 263 of Income Tax Act. 1961 on the ground that the A.O. has not been in a position to conduct proper inquiry. Although in these cases, the jurisdiction of the cases were transferred to the Assessing Officer at the fag end of the year due to unpleasant event of CBI raid on the earlier Assessing Officer. However the basic prin....
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....ear vs. ACIT; (2003) SOT 638 (Jabalpur)(Tri) (v) CIT vs. Amitabh Bachan (supra); Civil Appeal No.5009 0/2016 (SC) We further find that the Hon 'ble jurisdictional High Court in the case of CIT vs. CIT vs. Deepak Kumar Garg; 299 ITR 435 has categorically held as under :- "Held, that from the order of the Assessing Officer, it was clear that for want of time, the Assessing Officer had done only a semblance of enquiry and that too, in a very slip-shod manner. The Assessing Officer accepted the version of the assessee without proper enquiry and as a result a substantial amount of taxable income was not brought to tax. The Commissioner of Income tax had recorded a categorical finding that the order of the Assessing Officer for want of adequate enquiry was erroneous and prejudicial to the interests of the revenue and after setting aside the assessment order, remanded the matter to the Assessing Officer for fresh assessment on the merits. The learned CIT also directed the Assessing Officer to observe the rules of natural justice and to provide opportunity of hearing to the assessee before making a fresh assessment order on the merits. This would ade....
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....9;ble ITAT Kolkata in the case of Shubhlakshmi Vanijya Pvt. Ltd. 60 taxmann.com 60 wherein Hon'ble ITAT, while examining the retrospective applicability of proviso to section 68 of IT Act 1961 has beautifully analyzed the issue of applicability of amendments and laid down the above principles while examining the issue. Therefore it is imperative to examine the applicability of Explanation 2 to section 263 of IT Act 1961 in the light of principal laid down in the decision as discussed supra. The existing provisions of the Act after the insertion of explanation 2 stands as under: "Es+-Revision by the [Principal Commissioner or] Commissioner (1) The [Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer 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 an order enhancing or modifying the assessment, or c....
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....or any other person. [(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.] (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, [National Tax Tribunal.] the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of subsection (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. " The explanation 2 has been inserted in section 263 w.e.f. from 1st June, 2015 by Finance Bill 2015 to declare the law which reads as under:- "[Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in s....
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....or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. " This amendment will take effect from 1st day of June, 2015." "NOTES ON CLAUSES FINANCE BILL 2015- Clause 65 of the Bill seeks to amend section 263 of the Income-tax Act relating to revision of orders prejudicial to revenue. The existing provisions contained in sub-section (1) of section 263.provide that if the Principal Commissioner or Commissioner considers that any order passed by the assessing officer is erroneous in so far as it is prejudicial to the interest of revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made an enquiry, as he deems necessary, pass an order modifying the assessment made by the assessing officer or cancelling the assessment and directing fresh assessment. It is proposed to amend sub-section (1) of the aforesaid section to insert an Explanation so as to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in s....
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....held that such insertion of Explanation 2 has been declaratory and clarificatory in nature to provide clarity to the existing provision. Therefore, held that the order passed by AO shall be liable to be revised by the Pr. CIT/CIT if the AO has not followed the terms of Explanation 2 (a) and (b) of section 263(1) of IT Act 1961. The relevant part of decision of Hon'ble Bench is reproduced here under: Now, as can be seen above, the amendment to section 263 of the Act by insertion of Explanation 2 to Section 263 of the Act is declaratory & clarificatory in nature and is inserted to provide clarity on the issue as to which orders passed by the AO shall constitute erroneous and prejudicial to the interest of Revenue ,it is , inter-alia, provided that if the order is passed without making inquiries or verifications by AO which, should have been made or the order is passed allowing any relief without inquiring into the claim; the order shall be deemed to be erroneous and prejudicial to the interest of Revenue. The Hon'ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT (2000)109 Taxman 66 (SC) held that if the AO has accepted the entry in the statem....
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.... and verifications as warranted for the proper completion of the assessment, with respect to claim of deduction of Rs. 17. 72 crores with respect to the provisions for warranty, excise duty, sales tax and liquidated damages. Regarding the contentions of the assessee company that the CIT should have set aside the orders passed by the AD after giving appeal effect to the orders of the tribunal in the first round has to be rejected as the basic facts remains that the AD has not made any enquiry, examination or verification of the claim of the assessee company with respect to claim of deduction of provision of Rs. 17.72 crores with respect to provisions for warranty, sales tax, excise duty and liquidated damages, the order of the Tribunal would have adjudicated issues arising out of the orders of the authorities below whereby the facts still remains that the AD has not made any enquiry, examination or verification of the claim of the assessee company with respect to claim of deduction of provision of Rs. 17.72 crores with respect to provisions for warranty, sales tax, excise duty and liquidated damages. The order of the Tribunal in the first round of litigation has not been in....
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....al and Research centre for AY 2012-13. As directed the report in the case of M/s Bhandari Hospital and research centre (AADFB8l5lA) for A Y 2012-13 is submitted as under:- 2. The assessee is firm running hospital and research centre filed the return of income for AY 2012-13 on 13/09/2012 declaring total income at Rs. 94,31,692/-. The case was selected for scrutiny assessment through CASS and assessment was completed on 24/03/2015 by making the following additions to the returned income:- 1. Disallowance of open heart and operation theater expenses:- 5,10,543/- 2. Disallowance in pathology expenses: Rs. 3,20,835/- It is to be stated that a survey operation u/s 133A of the Income Tax Act, 1961 was conducted at the business premise of the assessee on 23/09/2011 and as a result an amount of Rs. 23,61,18,930/- was surrendered in the hand of the assessee as follows:- Sr. No. Name of the assessee Surrendered Amount (In Rs.) Heads 1 M/s Bhandari Hospital & Research Centre (As per statement dated 24.09.11 of partner Shri Vinod Bhandari - on account of Hundites 16,65,00,000/- On account of Hundies 2 M/s Bhandari Hospital & Res....
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....endered amount by Rs. 23,76,985/- on account of discount and Rs. 7,470/- being petty cash expense. 3.Enquiry related to recovering of hundi loans amounting to Rs. 16.65 crores. 4.Utilization of unaccounted funds to claim deduction U/S 35AC amounting to Rs. 8 crore. 5.Year wise investment made by the assessee. 6.Angiography receipts of Rs. 1,96,900/- not considered in unaccounted receipts, 7.Examination of profit ratio for three years and drawing of profit & Loss account and balance sheet as on date of survey and for the later period. 8.Genuineness of the transaction of donation of Rs. 8 crore to Geetanjali Medical University. 9.Depreciation claimed for PET Scan in higher rate @ 40%. 10. TDS deduction on salary payments amounting to Rs. 4,75,90,7911-. 6. Telescoping of undisclosed hospital receipts: The undisclosed hospital receipt of Rs. 6,21,25,115/- was allowed to be telescoped against the hundi loans given by the assessee amounting to Rs. 16,65,00,000/-. This set off was allowed to the assessee without proper verification and examination and how the hospital receipts surrendered during the course of....
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....its made in the bank account which the assessee claimed that these are the amounts recovered from hundi loan parties deposited in the bank accounts out of cash balance available in the cash book. In the case of present assessee M/s Bhandari Hospital & Research centre, the details of recovery of hundi loans was not properly verified with cash book and their identity & genuineness of the transaction was not established. The assessee was not asked to produce the parties for verification. The sources of cash deposits in the bank accounts were not enquired and hence it remains unexplained. Mere stating that the hundi loans of Rs. 16.65 crores recovered during the year cannot be conclusive evidence. The hundi loan parties, due date of maturity of hundis (as per hundies impounded) and date of deposit along with interest from parties is given in table below: S.NO. NAME AMOUNT INTEREST INRS. DUE DATE DATE OF DEPOSIT 1 SURENDRA SINGH 4500000 201945 17-10-11 17-03-12 2 MAHENDRA KUMAR NARENDRA KUMAR 4500000 236342 03-09-11 03-03-12 3 VIJA Y CHANDRA CHOUHAN 5000000 262600 30-09-11 30-03-12 4 JITENDRA PATEL ....
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....DAS 4000000 121315 29-08-11 29-11-11 40 SATISH SHAH 2500000 168904 11-07-11 11-03-12 41 RAMESH KHANDEL WAL 6500000 341384 30-09-11 30-03-12 Total 166500000 6022594 From the above table, it is very clear that the many of the hundies have matured before the date of deposit and the assessee has shown inflow of cash in cash book as loan repayment from various parties and further deposit in the bank account. Most of the deposit in the cash book are reflecting in the month of February to March however as per the impounded hundi copies, the due dates are two to three months from the date of survey. The above analysis and verification were not done during the assessment proceedings which render the order erroneous and prejudicial to the interest of the revenue since the identity & genuineness of the transaction of recovered hundi loans were not proved and verified. 9.Utilization of unaccounted funds to claim deduction u/s 35AC amounting to Rs. 8 crore: The assessee during the year has claimed a deduction amounting to Rs. 8 crore U/S 35AC owing to donation made to M/s Geetanjali....
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....ent proceedings and the assessee has cheated a distorted picture of the P&L account and the order is erroneous and prejudicial to the interest of revenue since the consolidated P&L account and balance sheet will not give real state of affairs of the assessee and investigation in to this issue was not made. 13.Genuineness of donation made of Rs. 8 Cr. In the above para, detailed discussion about the distorted picture of the P&L Account of the assessee was given and claiming of expenses were discussed in detail. Hence, there is a net loss of Rs. 5,62,61,171/- after excluding surrendered income. Hence, without profit, claim of deduction u/s 35AC is inadmissible and this aspect of enquiry was not conducted during the assessment proceedings. The hundi loans was shown as income from business by the assessee however they are unexplained investments. The issue was not in detail verified and to determine correct income of the assessee,' the credits in the bank account and sources thereof should be verified. The transaction ofRs. 8 Cr. given as donation is doubtful since the amounts were transferred after the date of survey and the assessee is incurring interest expendi....
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....d on 24/0312015 by making the following additions to the returned income> 1. Disallowance of open heart and operation theater expenses:- 5,10,543/- 2. Disallowance in pathology expenses: Rs. 3,20,835/- It is to be stated that a survey operation u/s 133A of the Income Tax Act, 1961 was conducted at the business premise of the assessee on 23/09/2011 and as a result an amount of Rs. 23,61,18,9301- was surrendered in the hand of the assessee as follows: Sr. No. Name of the assessee Surrendered Amount (In Rs.) Heads 1 M/s Bhandari Hospital & Research Centre (As per statement dated 24.09.11 of partner Shri Vinod Bhandari - on account of Hundites 16,65,00,000/- On account of Hundies 2 M/s Bhandari Hospital & Research Centre (As per statement dated 24.09.11 of partner shri Vinod Bhandari) 6,45,02,010/- On account of suppressed hospital receipts 3 M/s Bhandari Hospital & Research Centre (As per statement dated 24.09.11 of partner shri Vinod Bhandari) 51,16,920/- On account of bogus unsecured loans 3. Subsequently as per affidavit dated 23/0112012 the assessee has explained that the unaccounted receipts amoun....
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.... 12.Examination of profit ratio for three years and drawing of profit & Loss account and balance sheet as on date of survey and for the later period. 13.Genuineness of the transaction of donation of Rs. 8 crore to Geetanjali Medical University. 14.Depreciation claimed for PET Scan in higher rate @ 40%. 10. TDS deduction on salary payments amounting to Rs. 4,75,90,791/-. 6. Telescoping of undisclosed hospital receipts: The undisclosed hospital receipt of Rs. 6,21,25,115/- was allowed to be telescoped against the hundi loans given by the assessee amounting to Rs. 16,65,00,000/-. This set off was allowed to the assessee without proper verification and examination and how the hospital receipts surrendered during the course of survey was used for onward lending for loans given on hundi with date-wise receipts and payments. The assessee has simply stated that the unaccounted receipt of Rs. 6.45 crore was utilized in making the hundi loans without any basis or without any proper supporting documents and it is only an after thought of the assessee to reduce the tax burden and avoid paying taxes. These factors were not taken into considera....
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....ot established. The assessee was not asked to produce the parties for verification. The sources of cash deposits in the bank accounts were not enquired and hence it remains unexplained. Mere stating that the hundi loans of Rs. 16.65 crores recovered during the year cannot be conclusive evidence. The hundi loan parties, due date of maturity of hundis (as per hundies impounded) and date of deposit along with interest from parties is given in table below: S.NO. NAME AMOUNT INTEREST INRS. DUE DATE DATE OF DEPOSIT 1 SURENDRA SINGH 4500000 201945 17-10-11 17-03-12 2 MAHENDRA KUMAR NARENDRA KUMAR 4500000 236342 03-09-11 03-03-12 3 VIJA Y CHANDRA CHOUHAN 5000000 262600 30-09-11 30-03-12 4 JITENDRA PATEL 2500000 112190 24-10-11 24-03-12 5 KlSHAN 5000000 224384 08-10-11 08-03-12 6 VlRENDRA KUMAR 5000000 300822 22-08-11 28-03-12 7 KAILASH CHOUDHARY 5000000 224384 05-10-11 05-03-12 8 PRAKASH SINGHAL 3000000 22932 28-09-11 28-09-11 9 AMIT AGRAWAL 5000000 224384 03-10-11 03-03-12 10 KlSHAN LAL MALVIYA 4500000 ....
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....s loan repayment from various parties and further deposit in the bank account. Most of the deposit in the cash book are reflecting in the month of February to March however as per the impounded hundi copies, the due dates are two to three months from the date of survey. The above analysis and verification were not done during the assessment proceedings which render the order erroneous and prejudicial to the interest of the revenue since the identity & genuineness of the transaction of recovered hundi loans were not proved and verified. 9.Utilization of unaccounted funds to claim deduction u/s 35AC amounting to Rs. 8 crore: The assessee during the year has claimed a deduction amounting to Rs. 8 crore U/S 35AC owing to donation made to M/s Geetanjali University Trust. The aspect that whether the unaccounted funds generated by the assessee can be utilised for claiming deduction U/S 35AC was not examined during the assessment proceedings. The issue of deduction u/s 35AC was allowed without proper verification of the source of the funds by simply accepting the assessee's reply since the recovery of Hundi Loans is itself under question and the source is not verifiab....
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....storted picture of the P&L Account of the assessee was given and claiming of expenses were discussed in detail. Hence, there is a net loss ofRs. 5,62,61,171/- after excluding surrendered income. Hence, without profit, claim of deduction u/s 35AC is inadmissible and this aspect of enquiry was not conducted during the assessment proceedings. The hundi loans was shown as income from business by the assessee however they are unexplained investments. The issue was not in detail verified and to determine correct income of the assessee,' the credits in the bank account and sources thereof should be verified. The transaction of Rs. 8 Cr. given as donation is doubtful since the amounts were transferred after the date of survey and the assessee is incurring interest expenditure and having loan liabilities but donating a huge amount on charity ofRs. 8 Cr. is nothing but a way of the assessee to avoid tax liability on surrendered income and hence the transaction of Rs. 8 Cr. needs deep verification to ascertain the genuineness and hence the order is erroneous and prejudicial to the interest of the revenue. 14.Depreciation on PET CT Scan The assessee during the year has cl....
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..... has. not examined as to whether the Hundi loans was really received back by the assessee during the current year and no enquiry and investigation in this regard was carried out regarding identity and source of the sais funds. 11. Further, the A.O. did not examine whether the unaccounted funds generated by the assessee can be utilized to claim deduction u/s 35 AC of Act. The assessing officer has not examined unaccounted receipts offered for taxation in respect of receipts of Rs. Rs. 1,96,900/-. Ld. Pr. CIT observed that the returned income of the assessment year 2012-13 is Rs. 94,31,692/- whereas profit before tax before partners remuneration is as per P & L account is Rs. 3,64,88,334/-. It may be noted that the above profit included undisclosed income surrendered during the survey at Rs. 17,17,49,505/- & deduction of Rs. 8 Cr. claimed u/s 35AC. The assessee included the undisclosed income surrendered under various heads totaling to Rs. 17,17,49,505/- in the P& L Account itself thereby creating misleading picture of increase in the net profit as comparative to the last years. If the surrendered income as well as the deduction claimed u/s 35 AC was excluded the book results wou....
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.... is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person 13. The aforesaid explanation came on the statute book w.e.f. 01.06.2015 the issue before us pertains to assessment year 2012-13 hence this explanation have no application on the facts of the present case. So far the question of giving donation to the Gitanjali Hospital and Research Centre is concerned Ld. CIT-DR candidly conceded to fact that the conclusion drawn by the assessing officer is based upon inquiry conducted through commission. Hence on this issue, we are of the view, that it cannot be inferred that no inquiry was made by the assessing officer and he accepted the contention without making due inquiries on this issue. Further the objection of Ld. Pr. C....
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....ising the assessment order on this ground is not in accordance with mandate of law. Therefore, same is hereby set aside. 15. Another issue on which the Ld. Pr. CIT exercised power under Section 263 is regarding giving telescoping benefit of Rs. 6,21,25,115/- The Ld. Pr. AO was of the view that the telescoping of unaccounted income to Hundi loans has not been examined properly. Moreover, no enquiry has been made in respect of receipt of funds from repayment of Hundi loans. No independent verification of items due to which amount surrendered AO. 6,45,02,010/- was reduced to Rs. 6,21,25,115/-. Further the AO has not examined year wise investment made by the assessee. 16. Genesis of this issue is in the recovery of hundis at the premises of the assessee and statements of Dr. Vinod Bhandari one of the partners of the assessee firm recorded during the course of survey action. The relevant contents are reproduced herein for the sake of clarity: 17. The aforesaid statement was retracted vide letter dated 19.01.2012 by way of affidavit duly notarized the relevant contents as reproduced herein below. "11. In reply to Q.11 of the said statement, I had offered a sum of Rs.....
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....ical course by the assessee firm was subject matter of criminal investigation by the Police. 19. We are of the considered view that the criminal investigation and assessment proceedings are two different and distinct proceedings operate in entirely different sphere of law. No tax liability can be fastened merely on the basis that the tax payer is arrayed as an accused in some criminal investigation. There must be live nexus with taxable income and recovery made in criminal investigation. The revenue has filed a copy of charge sheet where the partners of the assessee firm is arrayed as an accused. There is no material suggesting the quantum of receipts was transferred by the partners of the firm out of the alleged proceeds of crime. There ought to be some receipt which the assessee could be subjected to tax. There are three limbs of this issue firstly claim of the assessee is that it used to advance hundi loans out of undisclosed/out of books hospital receipts, this is precise explanation offered by the assessee in respect of hundi found during the course of search, secondly the assessee has disclosed the amount of hundi loan as undisclosed hospital receipts, thirdly out of the m....
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....umstances pointing to that conclusion. What these several circumstances can be is difficult to enumerate and indeed, from the nature of the enquiry, it is almost impossible to do so." 20. Therefore, in the light of the above judgment it can be concluded that the maturity amount was available with the assessee for making further investment. It is noteworthy that root of addition is the recovery of hundis. In case it is presumed that all the hundis so made are bogus and reflects imaginary figure as the assessee failed to furnish confirmation from hundi holders, their identity and PAN etc, in such event only amount would be taxable what the assessee deposited in its bank account. When there is a maturity of hundi as well as investment in hundis normal corollary would be that the amount invested is out of the money received from maturity of hundis, unless adverse material is brought on record. No such material is available on record the Hon'ble Delhi High Court in the case of ITO vs. D.G. Housing Projects in ITA No. 179/2011 vide order dated 1st March 2012 has held as under: 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section....
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....r prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. 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 about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondents computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment....
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....plained cash deposits in its bank account. Therefore there is no infirmity in the order giving set off of the maturity amount. It is however further clarified that we have not expressed our view regarding genuineness of hospital receipts being invested in hundis as surrendered by one of the partner of the assessee firm. Our finding is purely based on the material placed before us. Ld. PCIT has not brought any material suggesting that the amounts so surrendered by the partner of the firm is related to proceed of crime. 22. Ld. Pr. CIT has also observed that the Assessing Officer failed to make enquiry in respect of year wise investment. No material is placed by the assessee regarding this issue. In our considered view when there is claim of investment being made out of unrecorded hospital receipts he ought to have made investigation regarding year wise investment. This observation of the Ld. Pr.CIT is sustained. 23. Further, another ground for revising the order of Ld. Pr. CIT allowing higher depreciation claim of the assessee. 24. We have perused rules and case laws as relied on by the Ld. counsel for the assessee. We do not find any infirmity into the action of the ass....
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....à¥à¤¯à¤® से आपके à¤à¤µà¤‚ आपकी Firm MysBh Hospital + Research centre के दà¥à¤µà¤¾à¤°à¤¾ विà¤à¤¿à¤¨à¥à¤¨ वà¥à¤¯à¤•à¥à¤¤à¤¿à¤¯à¥‹à¤‚ को विà¤à¤¿à¤¨à¥à¤¨ दिनको पर नकद शाही ऋण के रूप में दी? है। आपके दà¥à¤µà¤¾à¤°à¤¾ दी गई ऋणों से संबंधित छà¥à¤£à¥à¤¡à¤¿à¤¯à¥‹ à¤à¤•à¤¤à¥à¤°à¤¿à¤¤ कर Annexure LP-06' à¤à¤µà¤‚ Mys Bhandard Hof+tal & Research centre दà¥à¤µà¤¾à¤°à¤¾ दिठगठनकद से संबंधित दà¥à¤£à¥à¤¡à¤¿à¤¯à¥‹à¤‚ क़ो Annexure LP-07 नाà....
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.... हमेन जो à¤à¥€ नमी ऋण विà¤à¤¿à¤¨à¥à¤¨ वà¥à¤¯à¤•à¥à¤¤à¤¿à¤¯à¥‹à¤‚ को दिया हà¥à¤† है, इसमें से कोई à¤à¥€ शाही हमें अà¤à¥€ तक वापिस पà¥à¤°à¤¾à¤ªà¥à¤¤ नहीं हà¥à¤ˆ है। à¦09% Annexure LP-06' के अनà¥à¤¸à¤¾à¤° आपने विà¤à¤¿à¤¨à¥à¤¨ वà¥à¤¯à¤•à¥à¤¤à¤¿à¤¯ को विà¤à¤¿à¤¨à¥à¤¨ दिनांकों पर R कà¥à¤² नकद Rs. 7,00,00,000/ (रूपने सात करोड मातà¥à¤°) ऋण सà¥à¤µà¤°à¥‚प दिया हà¥à¤† है....
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....à¤à¤¿à¤¨à¥à¤¨ दिनांकों पर कà¥à¤² नकङ‌ शाशी Rs. 16,65,00,000/- (सोतह करोड़, पैसठलाख मातà¥à¤°) ऋण सà¥à¤µà¤°à¥‚प दिया हà¥à¤† है। कृपया दिठगठइस ऋण के सà¥à¤°à¥‹à¤¤ को सà¥à¤ªà¤·à¥à¤Ÿ गरे ? 30 मैं à¤à¥‡à¤¦à¥€ firm M/s Bhandari Hespitel 1 Research centre दà¥à¤µà¤¾à¤°à¤¾ इन छà¥à¤£à¥à¤¡à¤¿à¤¯à¥‹à¤‚ के माधà¥à¤¯à¤® से दिठगठनकद ऋण रà¥à¤ªà¤¯à¥‡ Rs. 16,65,00,000/- (रà¥à¤ªà¤¯à¥‡ 6, सोलह करोड़ पैंसठ....
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....¥‡ पà¥à¤°à¤¿à¤‚ट आउट लेटर Annexure 'LP-02 नाम दिया गया है उसकी Summary के अनà¥à¤¸à¤¾à¤° विà¤à¤¿à¤¨à¥à¤¨ महों की शकà¥à¤¤à¤¿ का कà¥à¤² योग Rs. 6,45,02,010/- आता है। आपके दà¥à¤µà¤¾à¤°à¤¾ पà¥à¤°à¤¸à¥à¤¤à¥à¤¤ firm की छाल तक জী. Total Receipt में शामिल नहीं ह कà¥à¤°à¤®à¤®à¤¾ इसे Rs.751869981- पà¥à¤°à¤¿à¤‚ट आउट जो कि LP02 में Page xlo. 01 हर से 96 तक जो à¤à¥€ hospital Receipts हà¥à¤ˆ हैं जो जिनकà....