TaxTMI 
TaxTMI 
2020 (5) TMI 189
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.... CASS. The Assessing Officer (the 'A.O.' for brevity) accepted the return of income without making any addition in this case vide order dated 23.03.2016 passed under section 143(3) of the Act. However, the Ld. PCIT after perusal of the assessment record was of the view that the assessment order was erroneous in as much as it was prejudicial to the interest of the revenue in respect of certain issues, hence, he issued show cause notice u/s 263(1) of the Act to the assessee as under: "3. As per CIB information, you made the following cash deposits in your bank accounts:- 1. 69,25,000 15.06.2012 2. 30,75,000 14.06.2012 3. 7,50,000 19.12.2012 4. 1,00,00,000 10.09.2012 5. 3,07,200 01.10.2012 6. 60,00,000 11.09.2012 Total 2,70,57 ,200 As per AIR Information, you made following cash deposits in your bank accounts:- 1. 1,60,00,100 31.03.2013 2. 1,04,74,700 31.03.2013 When enquired, you filed copy of cash book. As per Cash Book (copy obtained and available in records), you had shown opening cash-in-hand of Rs. 1,06,03,607/-. You are maintaining bank accounts in different banks ....
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....ently on 05.09.2012. These eight drafts were purchased from HDFC Account No. 123600. Huge deposits in this account had not been examined critically as per the provisions of Section 68 of the Income Tax Act, 1961 and had been presumed as genuine by the Assessing Officer simply on the basis of these transactions being of banking nature. Huge transactions in the bank accounts in respect of an assessee who has shown meager income of Rs. 8,43,730/- only should have been examined in depth. No income from such a large investment of Rs. 2 crone had been shown by you in the return. No cash flow statement furnished by you though specifically asked by the Assessing Officer in the questionnaire. 8. You gave interest free loans to VK. Holding at Rs. 7,30,000/, V.K. Infratech Pvt. Ltd. Rs. 1,66,30,000/- during the year. The nature of investments had not been examined. You had also given interest free advances to M/s V.K. Real tech Ltd., Delhi with opening debit balance Rs. 2,53,02,000/- and closing balance Rs. 1,97,02,000/, Benefit derived from these investments should have also been examined by the Assessing Officer. Without deriving any benefit directly or indirectly, such huge invest....
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....advances should have been examined by the Assessing Officer by obtaining complete addresses of the persons giving such advances. Particulars of persons with their PANs and Identities were not obtained and advances had been accepted as genuine by the Assessing Officer without any examination. Creditworthiness of the person's giving advances for indefinite period should have been probed by the Assessing Officer. Detailed investigation in respect of these advances could have resulted in unearthing particulars of income apparently concealed by the assessee." 3. In response to the aforesaid notice, the assessee filed reply on dated 12.03.2018 the contents of which have been summed up by the Ld. PCIT in the impugned order, which read as under: " The relevant submissions stated that as per CIB information regarding cash deposits in the bank account of the assessee was filed during the course of assessment proceedings. The case for the assessment year 2012-13 was also taken in scrutiny on the same fact. The assessee has been keeping cash in hand of a higher volume. The nature of business of the assessee requires cash in hand to clinch beneficial deals. How....
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.... High Court in the case of Bright Enterprises Pvt. Ltd. V.CIT, reported in 2016) 381 ITR 107. 5. Since it was a debit balance in the account of Sh. Ranjan Gupta, part of which was repaid during the period relevant for the above assessment year. Source of repayment are better known to debtor under the provisions of section 68 of the income tax Act 1961 the assessee is not required to prove the source of repayment by the creditor regarding non payment of interest by Sh. Ranjan Gupta. The amount of interest of free loans is much more than the amount advanced, inter alia to Sh. Ranjan Gupta the case of the assessee is supported by decision of Punjab & Haryana High Court in the case Bright Enterprises Pvt. Ltd. supra. 6. Since charging of interest on cancellation of deal was sine qua non of the transactions, non charging of interest cannot be objectionable. Further how a person arranges the funds on cancellation of a contract is not the responsibility of the assessee and hence no adverse inference may be drawn. 7. The assessee purchased eight drafts of Rs. 50,00,000/- each out of cash in hand available in the books and is quite apparent from the copy of the ca....
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....ndustrial Company Ltd. v. CIT (2000) 243 ITR 83 Amrik Singh v. Income Tax Officer, (2003) 127 taxman (Trib.) 87 ITAT Chandigarh decision in Smt. Neena Khullar, Samrala v. The CIT-II, Ludhiana, in ITA No. 443/Chandi/2012 dated 24.09.2012, CIT v. Anil Kumar Sharma [2011]235 ITR 83 CIT v. Rajiv Agnihotri, [2011] 332 ITR 608" 4. The ld. PCIT however, repeating the contentions raised in the show cause notice concluded that the assessment order had been framed by the A.O. without making inquiries or verifications which should have been made and even without application of mind. He therefore, held that the assessment order passed by the A.O. was erroneous in so far as it was prejudicial to the interest of revenue. He accordingly setaside the order of the A.O. to make assessment a fresh on the issues as noted above. 5. The assessee has thus come in appeal before us contesting the above action of the Ld. PCIT. 6. At the outset, the Ld. Counsel for the assessee has invited our attention to the assessment order in question dated 23.03.2016 passed u/s 143(3) of the Act and has submitted that the return filed by the assessee was originally processed ....
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....ntemporary evidence that the plea taken by the assesse was not correct. 2. Out of the debit balance of Rs. 4,11,48,066/- Against Smt. Gulshan Gupta amount aggregating to Rs. 1,32,50,000/- were received on two dates i.e. Rs. 1,00,00,000/- on 21.04.2012 & Rs. 32,50,000/- on 16.06.2012, the source of which in the hands of the payer was not asked The A.O was seized of the matter and vide letter dated 25.06.2015 (PB page 5 Para No. 10 detail of loans and advances received / given was duly called for in reply to which copies of accounts of loans and advances were filed. The issue was again clarified vide letter dated 19.10.2015 (placed at page 18 of PB). In respect of Dr. Gulshan Gupta and Ranjan Gupta, wife and son of the assesse, their copies of account duly confirmed by them were filed giving their PAN No. 3. No interest was charged on the debit balances of Gulshan Gupta and Ranjan Gupta During the course of revision proceeding it was explained to the learned PCIT that since the capital of the assessee and amount of interest free loans was much more than the interest free advances no adverse inference could be drawn in view of the decision of the Hon'ble juris....
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....iled copy of account of Setu Raman was filed and regarding the others and it was explained that the advances to Smt. Gulshan Gupta and contribution of capital of V.K. Holdings were carried forward balances this fact was explained vide query reply to no. 13 of letter dated 4.03.2016 filed on the same day. 8. Advances against the properties received but the A.O. did not make any enquiry as to the genuineness and factual aspect of the matter. No document was obtained by the A.O. concerning the advances. No document in the nature of agreement to cell had been obtained. The nature should have been examined by obtaining complete the details from the assesse. Vide letter dated 19.10.2015 it was explained vide reply to query no. 2 that expect for loans and advances except loan /advances to Gulshan Gupta and Ranjan Gupta all other advances and loans were old. During the course of proceeding of under section 263 it was explained to the PCIT ( page 36 of the paper book) all 35 advances were against sale of plots which pertained to assessment year 2012-13 and IN ere examined during course of assessment proceeding of the year. So for as the year under appeal is concerned no advance was....
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....earned PCIT has neither discussed nor distinguished any of them . In the light of above discussion, the order of the ld PCIT is null and void and is, therefore, liable to be quashed." 7. The Ld. Counsel for the assessee, therefore, has submitted that Ld. PCIT totally ignored the submissions of the assessee. That the assessee had duly given explanation on each of the contention raised by the ld. PCIT. However, the Ld. PCIT proceeded to set aside the assessment order with a predetermined mind and without considering or deliberating on any of the submissions made by the assessee. 8. The Ld. DR on the other hand has placed reliance on para 4.8 of the impugned order of the PCIT to submit that the Ld. PCIT has categorically observed that the A.O. simply accepted the submissions on the assessee but failed to make the required enquiries and verifications. 9. We have considered the rival contentions made by the representatives of both the parties. A perusal of the notices issued by the A.O. and replies thereto furnished by the assessee reveal that all the queries raised by the A.O. including about the source of deposits were duly answered by the assessee supported with the....
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....t in his consideration the order of the A.O. must be erroneous. As per the settled proposition, it is not the mere whim or wish of the PCIT to consider any order of the A.O. as erroneous, rather such consideration should be based upon justifiable reasons. Then at the first stage the Ld. PCIT may call upon and examine the records relating to such proceedings. In this case, the Ld. PCIT was of the view that the A.O. had not made the requisite enquiries. However, in reply to the show cause notice, when the assessee had shown from the record that the necessary enquiries were made by the AO and the AO had applied his mind and the view adopted by him was one of the possible views, then without considering the reply of the assessee and without recording his reasoned disagreement/dissatisfaction there to, it was not open to the Ld. PCIT to brand the order of the A.O. as erroneous. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order. 13. Then the second step for the Ld. PCIT, as per the provisions of section 263 as enumerated above, was that ....
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....ad used interest bearing funds to give advances to Smt. Gulshan Gupta and Mr. Ranjan Gupta. Moreover, the assessee explained to the Ld. PCIT that the amount of capital of the assessee and the interest free funds of the assessee were much more than the interest free loans advance given to the aforesaid persons. Ld. PCIT failed to make any observation as to why he did not get satisfied from the reply of the assessee on this point. Even the Ld. DR could not convince us as to how the Ld. PCIT was justified to direct the A.O. to make the enquiry regarding the genuineness of the advance of Rs. 14,55,000/- given in earlier years. We agree with the counsel for the assessee that since the amount was not received in the year there is no question of seeking evidence in this respect. Regarding the nature of investments made by the assessee, It was explained that the assessee was partner in the firm V.K. holding and shareholder in the other two companies which did not give any dividend. The Ld. DR could not point out as to what further enquiries were required to be made by the A.O. in this respect. Further regarding advances against sale of plots ,it was explained to the Ld. PCIT that no par....