AI Drafter 
TaxTMI 
TaxTMI 
2021 (8) TMI 499
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3.That The Ld. PCIT has erred in law and on facts in holding that the sufficient inquiries were not made to ascertain the genuineness and credit worthiness of the loan creditors in respect of unsecured loan undertaken by the Assessee in the Assessment Year 2013-14. 4.That there is a distinction between "lack of enquiry" and "inadequate enquiry". In the present case the Assessing Officer collected necessary details, examined the same and then framed the assessment u/s. 143(3) of the Act. Since the Assessing Officer had investigated/ examined the issue and applied his mind towards the whole record made available by the assessee and collected by the AO u/s 133(6) during assessment proceedings and uncontrovertedly, necessary details/reply to the questionnaire were filed/produced by the assessee and the same were examined by the Assessing Officer, therefore, the present case is not a case of lack of enquiry by the Assessing Officer and thus section 263 cannot be invoked by the Pro CIT. 5.That Explanation 2 to S. 263 inserted w.e.f. 01.06.2015 does not override the law as interpreted by the various High Courts whereby it is held that the CIT cannot treat....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... After passing of the assessment order u/s 143(3) of the Act, Ld. Pr. CIT examined the assessment records and documents filed by the assessee and notice that the assessment order is prima facie, erroneous and prejudicial to the interest of the revenue and accordingly issued following show cause notice dated 18.01.2018 to the assessee u/s 263 of the Act: F. No.Pr. CIT-2/IndITech/263117-l8 Date 18.01.2018 To, M/S RADHISHWARI DEVELOPERS PVT. LTD., F/H-198, SCHEME NO. 54, VIJAY NAGAR, INDORE Sub:- Show cause notice Ills 263 of the Income Tax Act, 1961, in the case of M/s Radhishwari Developers Pvt. CLtd., F/H-198, Scheme No. 54, Vijay Nagar, Indorc for A.V. 2013-14 PAN: AAFCR1916A_ reg. Please refer to the assessment order dated 07/03/2016 for A. Y. 2013- 14 in your case. On perusal of case record in your ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is a well known modus operandi of such paper companies of Kolkata to raise funds through huge premium despite having no worth on papers and then use these funds for accommodative entries. Therefore looking to the circumstances surrounding the transactions, the A.O. should have made inquiries regarding the creditworthiness of the lender company and also the source of such a huge amounts in the hands of the lender company. 5. On perusal of records it is also noticed that the assessee has received unsecured loans worth Rs. 21.85 Crores from various parties which includes some other Kolkata based companies who have entered into transactions for loan with the assessee on almost identical method discussed above. The details of loans from such companies are given here under:- SI.No. Name of the Company Amount received 1. M/s Apanapan Mercantile Pvt. Ltd. Rs. 33,00,000/- 2. M/s Bhimthal Nirman Pvt. Ltd. Rs. 25,00,000/- 3. M/s Confident Vinimay Pvt. Ltd. Rs. 65,00,000/- 4. M/s Crest Vanijya Pvt. Ltd. Rs. 31,00,000/- 5. M/s GieIle Investment Pvt. Ltd. Rs. 51,00,000/- 6. M/s Tropical Vyapar Pvt. Ltd. Rs. 28,00,000/- 7.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and the same was duly dealt and replied with by the Ld. Assessing Officer and satisfied the audit party. In reply filed by the assessee on.09.02.2018 to the show cause notice u/s 263 of the Act it was submitted that root cause for the issue of show cause notice by Ld. Pr. CIT was audit objection raised by the audit party. It was also submitted that all the information asked by the ld. Assessing Officer were duly replied and requisite information was received from the following cash creditors to whom notice u/s 133(6) of the Act was issued:- A M/s. Apanapan Mercantile Pvt. Ltd. B M/s. Bhimthal Nirman Pvt. Ltd. C M/s. Confident Vinimay Pvt.Ltd. D M/s.Crest Vanijya Pvt. Ltd. E M/s. Gielle Investment Pvt. Ltd. F M/s. Tropical Vyapar Pvt. Ltd. G M/s. Winsher Commercial Pvt. Ltd. H Glitter Dealmark P. Ltd. I Jayant Securities & Finance Ltd. 5. It was also submitted that all documentary evidences which could satisfy the identity of the cash creditors, genuineness of the loan transactions and the creditworthiness of the cash creditors were filed before the Ld. Assessing Officer and independent enquiry was also conducted by the Ld.AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee. The issue involved is acceptance of unsecured loans by the assessee which were apparently not properly investigated by the AO for ascertaining whether any addition should be made in the Income Tax Act if the same were not found proper i.e. the genuineness, creditworthiness and the identity of the depositors was proper. It was incumbent upon the AO to have verify everything properly by making necessary investigation and verification before accepting the deposits as correct. The records shows that the AO issued a questionnaire to the assessee on 12.01.2016 and the assessee is asked to submit information about unsecured loans taken during previous year given complete detail thereof. The assessee is also asked to prove the identity of the subscribed, genuineness of the transaction and creditworthiness of the subscribers also. The assessee vive reply dated 08.02.2016 submitted certain information which included confirmation of 21 depositors. The balance sheet, bank statement acknowledgement and computation of income of these depositors were also filed thereafter it appears that AO has issued 133(6) notice to the depositors and certain replies from the depositors are on record which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has taken strong action against such companies. In this background it was imperative for the AO to have further enquired whether the company was genuine or was shell companies as primafiacie, as discussed above, the indications are that it should be a shell company engaged in business of providing accommodation entries. He has simply obtained the information and did not make any effort to investigate further. Therefore, this type of action is a case of no enquiry at all. Further, as mentioned above the letter issued to Jayant Security and Finance Ltd. was received back unserved with the remark not known/left and someone filed the information before the AO. In the circumstances it is a clear case for suspicion for the AO and he should have made further enquiries about the existence of the company as in this case the confirmation was dated 1st April 2013 whereas the query was raised in the year 2016. It appears that the assessee has himself filed the confirmation before the AO. It is interesting to note that one confirmation for Jayant Security was filed by the assessee himself in response to the questionnaire and another confirmation for the same company was filed before th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enquiries about the creditworthiness of the loans received from these companies. In this connection further preliminary enquiries were made by the undersigned from the Investigation Directorate Income Tax Department, Kolkata about whether these companies are appearing in the list of the companies who were involved in giving accommodation entries. It has been informed by the Addl. DIT, Investigation, Kolkata That Winsher Commercial and Tropical Vyapar P. Ltd. were found involved in bogus LTCG transactions. Further, the database available with this office also should that Vishvjyoti Trading Ltd. was also involved in bogus LTCG transactions. These set of facts clearly indicates that there is a clear need to investigate the transactions from the bank account to ascertain the genuineness of the transaction and creditworthiness of the depositor companies. I have also written a letter to Investigation Directorate, Kolkata for making further investigation in the loan transactions vide this office letter dated 23.03.2018. The report still awaited. Regarding Jayant Securities and Finance Ltd. it has further been noted that in the case of Girish Kumar Tayalin Circle-5(1) Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing creditor companies. It is noted from there that the companies are again the one with low turnover, low business profit and apparently the creditworghiness and genuineness is required to be investigated properly. Accordingly, it was required that all the creditors/ depositors should have been properly examined to ascertain whether the deposits were genuine or the same were accommodation entries. In this connection letters for conducting enquiry have also been issued to Pr. DIT (Investigation), Bhopal, Ahmedabad and Nagpur. The above discussion clearly shows that the assessment order being erroneous in so far as it is prejudicial to the interest of revenue as per the provision of section 263 and explanation 2 to the section. The AO completed the assessment without making necessary investigation and enquiries which were necessary to arrive at the correct taxable income of the assessee. He didn't examine the creditors from the point of view of proviso to section 68, which is applicable from 01.04.2013. He should have enquired in detail about the sources of the credit given by the creditors. It may not be out of place to refer to the provisions of Explanation-2 to section 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndence which was made by the AO with the undersigned regarding the audit objection in which he had relied on certain judgements for justifying the action of the AO and not accepting the audit objection. First of all the internal correspondence made by the officer with its superior can not be relied by the assessee as an evidence or an opinion. However, the action of the AO i.e. the assessment order was erroneous and that is why the same is being set a side by invoking the provision 263 therefore, the views taken by the AO cannot supersede the view taken by the superior authority i.e. Pr. Commissioner exercising its judicial powers as per the provisions of the Act. The assessee has pointed out that the invocation of 263 proceedings without making require enquiries/investigation. The objection is not acceptable as there were several indicators and evidences available on record which shows that the assessing officer has not make any sufficient enquiries or verification in the matter. The judgement relied by the assessee in the case of Hotz Industries Ltd. (49 Taxman.com367) (Delhi) is also respectfully distinguished. In the present case it is clear from the facts that the cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2013 J.DATED 30.07.15, also reported as Subhlakshmi Vanijya (P.) Ltd. in 172 TTJ 721 (KOL) has..........virtually the whole law on 263. It has answered following questions most clarity; Q. Whether the enquiry conducted by the Assessing Officer in such cases can be as a proper enquriy ? A. Though the Assessing Officer issued notices under section 133(6) but it failed to comprehend the rationale or logic behind.............., nor to examine any of the ....................It is highly improbable for any person having sound mind to purchase at arm's length the shares of a private limited company, hardly having any worth, with face value of Rs. 10 at a premium of Rs. 190. This mere fact should have been cornerstone for the Assessing Officer to embark upon further enquiry to unearth the truth. The genuineness of transactions of issue of share at such hefty premium in this background of the matter was under dark cloud and it skipped the attention of the Assessing Officer. [Para 17.c.] 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 exam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t order. In the instant case, the assessment already stands finalized and now teh 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] Q. Whether inadequate inquiry conducted by the Assessing Officer empowers the Commissioner to revise the assessment order ? A. 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 circumstances. There cannot be straitjackket formula to positively conclude as to conducting or nonconducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just oridinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, the obtaining of the documents and the application of mind thereon, without a further outside enquriy, may mean that the Assessing officer did conduct enquiry, leaving the question open as to wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Commissioner to indicate where the Assessing Officer went wrong on merits in the cases of no enquiry cases, is like requiring an impossible thing to be done. It is axiomatic that the law does not require an impossible to be complied with. In the instant case the extent of enquiry conducted by the Assessing Officer, being as good as no enquiry, is sufficient in itself to empower th Commissioner for invoking his jurisdiction under section 263. Under such circumstances, no impossible burden can be cast on the Commissioner to show the positive leakage of income in concrete terms, when he has simply set aside the assessment order and restored this aspect of the assessment to the file of the Assessing Officer for making a proper enquiry and then deciding . [Para 20.g] Q. If the Assessing Officer has taken a possible view, can still the revision be ordered ? A. Where the Assessing Officer fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, the commissioner is empowered to set aside treh assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, the Assessing Officer c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enquiry to find out the correct income of the assessee and not to take the facts placed by teh assessee on their face value. No proper enquiry appeared to have been made by the Assessing Officer in the instant case. It is well settled that if the Assessing Officer fails to make a proper enquiry this is erroneous and prejudicial to the interest of the revenue. [Para 13] 6.2.4 Malabar Industrial Co. Ltd. [2000] 109 Taxman 66 (SC) Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e. if order of income-tax officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes- Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue held, yes. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without applicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gned revisional order did not require any interference- Held, yes [Para-16] [ In favour of revenue] 4.0 Therefore, in view of the above discussion I am of the considered opinion that the order dated: 06.01.2016 for A.Y. 2013-14 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the order without making required enquiries/investigations. Accordingly, I am satisfied that provisions of section 263 of I.T. Act. 1961 are required to be invoked. Therefore, the assessment for A.Y.2014-15 framed on 06.01.2016 is hereby set-aside to the file of AO to re-examine all the unsecured loans taken by the assessee company which are reflected in schedule Note 6 of the annual audited accounts for FY 2012- 13 submitted by the assessee before the AO during the assessment proceedings He is directed to get complete investigation done about various unsecured loans taken by the assessee company. He is directed to also verify the entries in the bank account, nature of business of the company and check from the investigation Directorate of the Jurisdiction to which the lender company belongs. The database which contains information ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se records during the course of insepction reveals that audit objection was raised by the audit party and the same was being dealt with. It seems that to settle the objection of trhe audit reply was forwarded. Thus, it seems that the audit objection may be the route for issue of show-casue notice u/s 263 of the Act. However, it is submitted that it is almost a settled law that on the basis of audit objection or even recommendation of the Assessing Officer, provisions of section 263 cannot be invoked. It is the prerogative of the Principal Commissioner of Income Tax, on examination of case records suo-moto to invoke the provisions of section 263, if he considers that any order passed by the learned Assessing officer is erroneous in so far as it is prejudicial to the interest of the revenue. Therefore, considering the inspection of records of the learned Assessing Officer.......being audit objection was dealt by him and thus, issuing notice u/s 263 is ....void. In this regard reliance is placed on the following decisions :- In view of the above, the show-cause notice u/s 263 is ab-initio void and requires to be quashed. Without prejudice to the above and perusal of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g Officer during the assessment proceedings. The counsel of the assessee company had appeared before the learned Assessing Officer and filed replies. Thereafter, after due/required enquiry/ verification u/s 133(6), which shyould have been done at the end of the learned Assessing Officer, order was passed u/s.143(3). Thus, the prime reason so mentioned in the show-cause notice for invoking of section 263 is without making required enquiries/investigation is having no force. Our contention finds support from the decision of Hon'ble Delhi High Court in the case CIT-IV v. Hotz Industries Ltd. 226 TAXMAN 0252, wherein it is held that - "Commissioner in the orfder under section 263 observed that the 'assessing officer it appears' had 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 was reached by the assessing officer, it cannot be said that it was a case of no inquiry. In such cases, the Commissioner must ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the Assessing Officer examined all the details with respect to assessee's claim of deduction, the order could not be said to be erroneous or was passed without application of mind merely because the same was not elaborate order. CIT v. Design & Automation Engineers (Bombay)(P) Ltd. 323 ITr 632 (Bom.)(HC), Manish Kumar v. CIT 134 ITD 27 (Indore) (Trib); f. Prakash Asphalting & Toll Highways (India) Ltd.Vs. Pr. Commissioner of Income Tax (ITAT, Indore Bench, Indore) (32 ITJ 141); g. Shri Narayan Tatu Rane vs. ITO, Mumbai (Mumbai ITAT). h. It the Income Tax Appellate Tribunal, Delhi "A" Bench, New Delhi in ITA No. 3206/DEL/2017, M/s. Amira Enterprises Ltd. Vs. The Pr. C.I.T. wherein it is held that the Id. PCIT has not referred to Explanation 2 of section 263 which has been inserted with effect from 01.06.2015 however we agree with the finding of the coordinate bench in the case of Narayn 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 prejudicial to the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... place on the following decisions :- a. Section 263 does not visualize a case of substitution of judgment of Commissioner for that of the Assessing Officer, unless the decision is held to be erroneous. Antala Sanjay Kumar Ravjibhai v. CIT 135 ITD 506 (Rajkot) (Trib.), Manish Kumar v. CIT 134 ITD 27 (Indore) (Trib.) b. The error envisaged by Section 263 is not one that depends on possibility or guess work, but it should actually be an error either of fact or of law. ACIT v. Technip Italy Spa 150 Taxman 13 (Delhi) Trib.), Pratap Footwear v. ACIT SOT 638 (Jabalpur) (Trib.). c. CIT v. Gabriel India Ltd. [203 ITR 108] Bom HC). From the aforesaid discussions it is clear that the order so passed by the learned Assessing Officer in the instant case cannot be termed as erroneous unless it is not I accordance with law. Since, there is no issue in the order which can be said that the same is unsustainable in law and therefore, the first limb of section 263 i.e. the order is erroneous, is absent and needs to be quashed. Without prejudice further, to the above fit is submitted that the second limb of section 263 ie. The subject order is prejudicial t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore, cumulatively prove the identity of the loan creditors, their crteditworthiness and genuineness of the transactions. There is thus no ground or basis to dispute the correctness of the loan transactions as the same is fully supported from facts and settled legal principles laid down from time-to-time. Therefore, the onus cast on the assessee u/s 68 of the Act was duly discharged by it. Therefore, when all the ingredients contained in section 68 are fulfilled, there is hardly any scope to invoke the provisions of section 263 of the Act, alleging introduction of unexplained funds in the form of cash credits. The burden so shifts on revenue to establish that such credits has actually come from Asseessee Company itself. However, as stated above, no evidence was available on record by which the department may reach to the conclusion that the unsecured loan money has been brought in the name of the loan creditor companies by the assessee company itself. In this regard reliance is placed on the following decisions.:- a. Jt. CIT v. Durga Charitable Society & Vice-Versa 2017 TaxPub(DT) 4549 (Del-Trib); b. Reliance Corpoation & Anr. V. ITO & Anr. 2017 TaxPub(DT) 1443 (Mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issues reaised in show-cause notice in question are concerned, we have to submit that the learned Assessing Officer has issued notices u/s 133(6) in loan creditor companies (supra). That after getting the requisite details and satisfying with the documents / evidences, the learned Assessing Officer has accepted all the loan credits as genuine. This, from the perusal of the audit objection reveals that audit party was satisfied with the enquiries and the issues under the present assessment related to credits on account of acceptance of loans, which was explained and justified initially by providing requisite details by the assessee company and subsequently independent enquiries were made by the learned Assessing Officer by way of issue of notice u/s 133(6). Such details must have been examined by the departmental audit team and after their examination only in the matter of M/s Gliter Dealmart P. Ltd. They could have observed that credit worthiness was not established. In this regard it is submitted that once the enquiries have been made and the Assessing Officer is satisfied as per his own discretion, no comment is permissible unless contrary is available in case records. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s 133(6), there seems to be no reason to raise doubt, only based on presumption. That being finance companies, funds were utilized for optimum yield and thus, the observation that funds were received on the same day through RTGS/ Cheques, is having no force. It is also, pertinent to note that funds with the loan creditor companies are not pertaining to the year in question. Even though in support of genuineness we are enclosing herewith copies of assessment orders passed in the case of following companies, wherever possible:- a. Tropical Vyapaar P.Ltd.; b. Bhimatal Nirman P.Ltd; c. Winsher Commerical P.Ltd.; As regards the observation regarding unsecured loan shown in the name of M/s Jayant Securities & Finance Ltd. At Rs. 1,85,50,000/- even no question was raised on the genuineness of such lenders in audit objection and it is referred only in show-cause notice u/s 263 stating that loans from the said company was held as unexplained cash credit in the case of Muktilal Laduram Prop. Shivashakti Trading Company, Sendhwa, for A.Y. 2014-15. In this regardit is submitted that the acts of the above case are not made known to the assessee comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the show cause notice:- a. CIT vs. Contimeters Electricals (P) Ltd. [2009] 317 ITR 249(Delhi) b. CIT vs. Ashish Rajpal [2010] 320 ITR 674 (Delhi) c. CIT vs. D.N. Dosani (2008) 280 ITR 275 10. Ld. Counsel for the assessee also submitted that ld. Pr. CIT has himself observed that the source of unsecured loans received from the alleged cash creditors was transferred from other companies to the cash creditors. So the source of source is through banking channel only. Most of the cash creditors have been assessed under the provisions of section 143(3) of the Act and no adverse view has been taken by the revenue authorities in the assessment order so passed. All the cash creditors are having sufficient funds to give loan to the assessee. They are having sufficient share capital, share premium and reserves & surplus and also carrying out regular business activities and are mostly engaged in the business of earing interest. Most of these companies have replied to notice u/s 133(6) of the Act. Detailed enquiry was conducted by the Ld. Assessing Officer to examine this aspect. 11. Ld. Sr. Counsel for the assessee further submitted that proviso inserted by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the judgment of Hon'ble Delhi High Court in the case of D.G. Housing Projects Ltd. 92012) 343 ITR 329 (Delhi). 14. Further reliance was also placed on the following decisions: S.NO PARTICULARS PAGE NOS. 01 Cadila Pharmaceuticals Ltd (ITAT Ahmedabad Bench) 01-10 02 Madhusudan Industries Ltd (ITAT Ahmedabad Bench) 13-22 03 Pr Commissioner of Income-Tax Vs Narayan Balmukand Dubey [2017 30 ITJ 335 (M.P)] 23-35 04 Director of Income Tax Vs Jyoti Foundation [(2013) 357 ITR 355 (Delhi)] 36-41 05 Commissioner of Income Tax VS Ratlam Coal Ash. Co [(1988) 171 ITR 141 (M.P)] 42-43 06 Commissioner of Income Tax Vs Mehrotra Brothers [(2004) 270 ITR 157 (M.P)] 43-44 07 Commissioner of Income Tax, Delhi Vs International Travel House Ltd [(2012 ITR 554 (Delhi)] 45-51 08 Income Tax Officer Vs D.G Housing Projects Ltd. [(2012) 343 ITR 329 (Delhi)] 52-59 09 M/s Amira Pure Foods Pvt Ltd (ITAT Delhi Bench) 60-96 10 M/s Narayan Tatu Rane (ITAT Mumbai Bench) 97-117 11 Pr Commissioner of Income Tax v Delhi Airport Metro Express Pvt Ltd (High court of Delhi) 118-122 12 Moil Ltd v Commiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act and issued show cause notice. 19. Before proceeding to examine the facts of the case as to whether Ld. Pr. CIT has rightly assumed jurisdiction u/s 263 of the Act and whether he has justified in holding the order of Ld. A.O as erroneous and prejudicial to the interest of revenue, we will first go through the relevant provision of Section 263 of the Act and settled judicial precedence:- 263. (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 cancelling the assessment and directing a fresh assessment. Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed on or before or after the 1st day of June, 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 sub- section (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. 20. On a bare perusal of the sub-section (1) would reveal that the powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to the assessment order only. It cannot be argued that there is some possibility of the assessment order being challenged or revised in appeal and, therefore, on account of this contingency, the order becomes prejudicial to the interests of the revenue." [emphasis supplied] 23. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983- 84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterial in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied] 25. Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy - [1985] 20 Taxman 65 - order pronounced on 19.03.1984 - Para 10 - "Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue. Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not feel satisfied with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course assessment proceedings on the relevant issues and the assessee has detailed explanation by a letter in writing and the Assessing allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be simply because in his order he does not make an elaborate discussion in that regard. 27. Now examining the facts of the instant appeal in light of the above s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see company during the year. It is not disputed at the end of Revenue that notice issued by the Ld. AO under CASS was with regard to the reason of 'large unsecured loans' received by the assessee during the year. After selecting the case for scrutiny under CASS, notices u/s 143(2) & 142(1) were served on 29.12.2014and17.11.2015 which was replied on 30.12.2015 enclosing copy of ITR computation, details of business, bank statement and tax audit reports. Again a detailed questionnaire was issued on 12.01.2016 in connection to assessment proceedings directing to the assessee to reply to 24 points which included various details of items appearing in profit and loss and balance sheet. Specific information was called by Ld. AO with regard to unsecured loans taken during the year in point nos.15 to 19 which are reproduced below: 15. Please give the details of any loans or deposits or the aggregate of any such loans or deposits exceeding Rs. 20,000/- or more taken or accepted otherwise than by an account of payee cheque or account payee bank draft. If there are any, you are requested to explain the reasons for the same in detail, within the meaning of section 269SS and as to why ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. Confirmation, balance sheet, profit & loss account & acknowledgement of Gille Investment Limited has been annexed in Annexure No.2 31. Again on 08.02.2016 another reply was submitted, replying to the points raised by the Ld. AO and in para 11 of this reply (page on 175 of the paper book) assessee filed the confirmation of the unsecured loans audited balance sheet, bank statement, acknowledgement and computation of Income Tax returns of following lender companies: 1)Apnapan Merchantile Private Limited 2)Beryl Drugs Limited 3)Beryl Securities Limited 4)Bhimtal Nirman Private Limited 5)5) CMM Infraprojects Limited 6)Confident Vinimay Private Limited 7)7) Creative Technochem Private Limited 8)Crest Vanijya Private Limited 9) Dishman Pharmaceuticals and Chemicals Limited. 10)Enit investment Private Limited 11)Hitwin Finance Company Private Limited 12) Gliter Deal Mart Private Limited 13) JV Modi Securities Private Limited 14) Jayant Securities and Finance Limited 15)Jay Jyoti India Private Limited 16)KCL Infraprojects Limited ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Pvt. Ltd. during the F.Y.2012-13 33-34 B-2 Bank statement from 25.04.2012 to 30.03.2013 35-44 B-3 Confirmation of account from 1.4.2012 to 31.3.2013 45-46 B-4 Income Tax return (ITR) acknowledgment for A.Y. 2013-14 47 B-5 Audited balance sheet, P & L account for the A.Y. 2012-13 & 2013-14 48-66 C Regarding M/s Apnapan Mercantile Pvt. Ltd. 1 Submission made in response to notice u/s 133(6) of the act dated 22.2.2016 along with annexures 67 C-1 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 68 C-2 Audit Report for the F.Y. 2011-12 & 2012-13 69-88 C-3 Bank Statement from 09.10.2012 to 04.01.2013 89-90 D Regarding M/s Crest Vanijya Pvt. Ltd. 1 Submission made in response to notice u/s 133(6) of the act dated 23.2.2016 along with annexures 91 D-1 Income Tax return (ITR) acknowledgment for A.Y. 2012-13 & 2013-14 92-93 D-2 Audit Report for the F.Y. 2012-13 94-104  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee's case was selected for scrutiny to examine the 'large unsecured loans'. All documentary evidences to establish the identity, genuineness and creditworthiness were called for by the Ld. AO and each of such information was promptly replied by the assessee. Ld. AO further enquired by calling information u/s 133(6) of the Act which was also replied by most of the cash creditors ascertaining the facts that unsecured loans have been given to the assessee. In the Bank statement of the cash creditors there is no deposit of cash immediately before the issue of cheque/bank transfer to the assessee. There was either sufficient bank balance or there was transfer in the bank account of the cash creditor which was used to give unsecured loans. Interests have been paid on all the unsecured loans and income tax at source has been deducted. Now in the light of all these documentary evidences and detailed enquiry as per wisdom of the Ld. AO it can be safely construed that the Ld. AO made detailed enquiry, made proper application of mind and examined all the cash creditors by calling various information and was satisfied with the three parameters i.e. identity of lender, genuineness of loan t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r being erroneous and prejudicial to the interest of revenue. This issue came before Hon'ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. (supra) wherein Hon'ble Court after examining entire law on the issue held as under: "16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase "prejudicial OM Prakash Badaya to the interest of Revenue_ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order 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 m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inding of Ld. Pr. CIT is not supported by any enquiry conducted by him independently. We, also note that in para 2 of the impugned order wherein Ld. Pr. CIT has given the finding, he seems to have given the same on surmises and conjecture. For instance in para 2.1 of the impugned order on one hand he records finding that the assessee was asked by the Ld. AO to prove the identity of the subscribers, genuineness of the transactions and creditworthiness of the subscribers to which the assessee has replied to all the information for 21 depositors along with filing the balance sheet, bank statement, acknowledgment and computation of income. Thereafter Ld. Pr. CIT records a finding that Ld. AO has issued notices u/s 133(6) of the Act to the depositors and reply from depositors are on record so Ld. Pr. CIT accepted that Ld. AO has raised enquiry, collected information from assessee and also collected information from independent source. Then Ld. Pr. CIT mentions that "it appears that somebody on behalf of those parties filed the information". 40. Again with regard to information filed in the case of M/s. Jayant Security Finance Ltd. it is mentioned that "subsequently somebody filed the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....24 35,48,721 Crest Vanijya Pvt. Ltd. 8,94,000 3,89,09,628 8,69,704 Tropical Vyapar Pvt. Ltd. 7,93,880 12,11,88,583 29,778 Jayant Securities & finance Ltd. 2,84,18,000 2,06,05,823 83,96,995 Confident Vinimay Pvt. Ltd. 12,07,000 7,83,68,708 7,32,75,226 Gills Investment Ltd. 6,00,000 4,40,364 1,12,152 Name of creditor As on 31.03.2013 Paid up share capital Reserve & surplus Cash and bank balance Gliterdeal Mart Pvt. Ltd. 32,42,400 7,96,40,524 10,78,109 Apnapan Mercantile Pvt. Ltd. 13,05,000 5,88,49,812 22,62,991 Bhimtal Nirman Pvt. Ltd. 22,72,400 9,26,70,936 3,67,096 Winser Commercial Pvt. Ltd. 1,34,09,300 28,73,00,396 95,26,271 Crest Vanijya Pvt. Ltd. 8,94,000 3,88,68,340 17,39,179 Tropical Vyapar Pvt. Ltd. 7,93,880 12,11,61,536 15,28,037 Jayant Securities & finance Ltd. 2,84,18,000 18,66,24,192 13,45,225 Confident Vinimay Pvt. Ltd. 12,07,000 7,85,75,475 7,79,42,367 Gills Investment Ltd. 6,00,000 4,89,498 23,71,254 42. Further it is also appearing from records that out of the 9 parities i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s between the assessee and cash creditors and also satisfied with the creditworthiness of the cash creditors. We further find that this is not a case of no enquiry or inadequate enquiry and also find that Ld. Pr. CIT had not carried out any independent enquiry at his end and thus grossly erred in observing that the order of the Ld. AO u/s 143(3) of the Act is erroneous and prejudicial to the interest of Revenue. The impugned order deserves to be quashed in light of the judgment of Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (supra), Max India Ltd (supra) and Green World Corporation (supra) and also the decision of Coordinate Bench Mumbai in the case of ITO vs. Shri Narayan Tatu Rane in ITANo.2690 & 2691/Mum/2016 dated 06.05.2016 and the judgment of Hon'ble Delhi High Court in the case of D.G. Housing Projects Ltd.(supra). In the instant case Ld. Pr. CIT failed to show that both conditions exists i.e. neither it has been proved that order is erroneous nor it has been proved to be prejudicial to the interest of revenue. We thus find merit in the contentions of the assessee that the revisionary order passed by the Ld. Pr. CIT i....