TaxTMI 
TaxTMI 
2021 (10) TMI 455
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.... the year under consideration, a survey u/s 133A of the Act was carried out at the business premises of the assessee. During the survey proceedings, the assessee had voluntarily surrendered a sum of Rs. 1.15 Crore on account of discrepancies found in the books of account and inflated expenditure. In the return, the assessee had declared total income Rs. 1,79,37,270/-the year under consideration. The case was selected for scrutiny and various notices were issued by the AO on various dates. The AO completed the assessment on 11/12/2018 determining totaling total income of the assessee at Rs. 2,24,87,770/-. Thereafter, the ld. PCIT had issued a show cause notice dated 22/02/2021 which was served upon the assessee. In response to the notice U/s 263 of the Act, the assessee submitted reply before the ld. PCIT and finally the ld. PCIT passed the order U/s 263 of the Act on the ground that the order U/s 143(3) of the Act dated 11/12/2018 passed by the A.O. is found to be erroneous in so far as it is prejudicial to the interests of the Revenue. The order passed is based on incorrect/mistaken assumption of the facts of the case by way of accepting the statement of the assessee without due v....
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....gs all the duly signed account statement, bank accounts, ITR and interest account were duly furnished and properly verified by Ld AO. There has not been any single amount of cash being deposited into the accounts of cash creditors. The money has come from the banking channel and the payers were regular assessee of Income Tax. Thus the onus of identity and genuineness of cash creditors stand discharged. Since there is no factum of cash being deposited immediately prior to the issue of cheque in favour of assessee, the source of money is also established. There is no obligation on the part of AO to inquire into the source of source of cash credit. AO having examined all the details had not drawn any adverse inference against any loan creditors and did not follow a view 'unsustainable in law' and assessment order was not the result of non-application of mind or any inadequate enquiry, accordingly, invocation of jurisdiction under section 263 was untenable. The courts across the spectrum have unanimously held that the order of AO can be brandished as erroneous if it is unsustainable in the eyes of law. He relied on the decision in the case of Citystar Ganguly Projects Ltd. Vs P....
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....erefore, no disallowance was made by AO on account of Non deduction of TDS. Further the Chartered Accountant in TAR has not pointed out any disallowance u/s 40(a)(ia) of Income Tax Act on account of Non deduction of TDS. Hence the order passed by the Ld. Pr. CIT is bad in law and is requires to be quashed. Issue/Point 5: It is evident that assessee has received a total loan of Rs. 15 Lacs from one Smt. Rekha instead of Rs. 10 Lacs as shown by you. Apart from this Smt Rekha verma has filed her ITR for the year under consideration showing income of Rs. 2,68,662. During the course of Assessment proceedings the ITR, Computation, Bank Statement and confirmation of accounts of all cash creditors including Smt. Rekha Verma were furnished. In the confirmation of accounts both assessee as well as the cash creditor put their signatures in token of having accepted the veracity of transactions. Further the bank statement of Rekha Verma also highlighted the payment made by her to assessee. The Bank Statements of the assessee are also on records. If such type of money had been paid by Rekha verma it would have featured in the bank statement of the assessee. Th....
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.... and A.O. has not verified the same fact. However, as per the ld AR, the allegation of PCIT is unfounded and factually incorrect. Our attention was drawn to audit financial statements are available on record and from perusal the same, it was found that by virtue of surrendered amount the capital has not increased directly. In place the surrendered amount formed part of the credit side of the Profit & Loss account and consequently the profit for the year was increased by corresponding amount of Rs. 1.15 Crore. On the contrary in the capital account which is also available on record, we find that there is no such credit entry of Rs. 1.15 Crore. Thus Capital Account was not directly impacted by amount surrendered. The proposition of ld. PCIT calling for reduction in debtors or creditors from surrendered amount is beyond comprehension. As per facts, the assessee is a Civil Contractor and the awarders are to be corporate or Govt. Departments. They may figure in the list of sundry debtors, but then how the amount of sundry debtors can be reduced as a result of surrender. The AO after due examination and verification subjected the surrendered income of Rs. 1.15 Crore to tax at the flat ra....
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....(ITAT Kolkata) in ITA No. 1103/Kol/2019 Date of order 31/10/2018 wherein it was held as under: "We are also alive to clause (a) of Explanation (2) to Section 263 of the Act inserted by Finance Act, 2015 w.e.f. 01.06.2015 which seeks to clarify that the order passed by the lower authorities to be erroneous in so far as prejudicial to the interest of the Revenue in the event of absence of inquiry which should have been made. The aforesaid clause only provides for situation where inquiries or verifications should be made by reasonable and prudent officer in the context of the case. Such clause cannot be read to authorize or give unfettered powers to the Commissioner to revise each and every assessment order. The applicability of the clause is thus essentially contextual. As observed in the preceding paras, the AO had made specific and detailed cross verifications from the loan creditors and the information gathered from them, satisfied the three ingredients embedded in Section 68 of the Act. Apart from making sweeping statements, which have been found to be factually erroneous, no objective material has been brought on record by the ld. Pr. CIT to implicate the assessee or th....
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....int No. 3: As per the PCIT, the assessee has shown opening balance of loan as on 01.04.2015 from Virendra Agarwal HUF at Rs. 17,13,420/- and on 14.12.2015 the assessee has again accepted loan of Rs. 10,00,000/- from Virendra Agarwal HUF. Whereas the said Virendra Agarwal HUF has shown income of Rs. 94,426/- only in its ITR. According to ld. PCIT, the said Virendra Agarwal HUF did not charge any interest on this loan from the assessee, therefore, the AO was directed to examine and verify the creditworthiness of the creditor namely Virendra Agarwal HUF and genuineness of transaction. 10. In this regard, after examining the documents placed on record and hearing the parties, we found that the ITR, Confirmation, Bank Statement of Sh. Virendra Agarwal HUF is available on record. As per ld. AR, the same was duly examined and verified by the AO. However, from the perusal of bank statement, it is obvious that the immediate source of money given to the asseesee as unsecured loan was the proceeds realized by Virendra Agarwal HUF from the FDRs. Thus, in this way, the money received from FDRs constituted the 'source of unsecured loan' given to the assessee but the Ld PCIT doubted that the c....
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....of having accepted the veracity of the transactions. Further the bank statement of Rekha Verma also highlighted the payment made by her to the assessee. The bank statements of the assessee are also on record and in case, any amount had been paid by Rekha Verma then the same would be featuring in the bank statement of the assessee. Accordingly, the Ld PCIT has gone wrong in assuming that the transaction dated 14.05.2015 for Rs. 5 Lacs as that of the assessee. In this regard, it was pointed out by the ld. AR that the aforesaid amount was received by way of loan by the wife of the assessee Smt. Sunita Agarwal. The reason behind the existence of Narration "TO YS AC RTGS" in both the transaction involving the assessee and his wife is the fact that the assessee is Prop of M/s Yash Trading Corporation and his wife is Prop of M/s Yogesh Enterprises. The cash credits were received by both of them in the bank account of their respective proprietorship concern. Therefore, the nomenclature in the narration are same. Apart from this, from the Bank statement it is obvious that the immediate source of unsecured loan of Rs. 10 lakhs to Rekha Verma was the money received by her from M/s Jaishree Pr....
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....n condition and in case if one of them is absent then recourse cannot be had to Section 263 of the Act and thus in this way the provisions cannot be invoked to correct each and every type of mistake or error committed by the A.O.. It is only when an order is erroneous then the Section will be attracted. Even the Coordinate bench of ITAT in the decision of Sir Dorabji Tata Trust Vs DCIT(E) 188 ITD 38 had discussed and explained the nature and scope of provisions of explanation 2(a) of Section 263 of the Act and held as under: "19. The question that we also need to address is as to what is the nature of scope of the provisions of Explanation 2(a) to Section 263 to the effect that an order is deemed to be "erroneous and prejudicial to the interests of the revenue" when Commissioner is of the view that "the order is passed without making inquiries or verification which should have been made". 20. Undoubtedly, the expression used in Explanation 2 to Section 263 is "when Commissioner is of the view," but that does not mean that the view so formed by the Commissioner is not subject to any judicial scrutiny or that such a view being formed is at the unfettered discretion ....
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....cer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that "the order is passed without making inquiries or verification which should have been made". The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. 21. That brings us to our next question, and that is what a prudent, judicious, and responsible Assessing Officer is to do in the course of his assessment proceedings. Is he to doubt or test ever....
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....but not a bloodhound.". Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bona fide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bona fide, and as long as the path adopted by the Assessing Officer is taken bona fide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Malabar Industrial Co Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83, Hon'ble Supreme Court has held that "Every loss of revenue as a consequence of an order of the Assessing Officer c....
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.... every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made." 22. Having said that, we may also add that while in a situation in which the necessary inquiries are not conducted or necessary verifications are not done, Commissioner may indeed have the powers to invoke his powers under section 263 but that it does not necessarily follow that in all such cases the matters can be remitted back to the assessment stage for such inquiries and verifications. There can be three mutually exclusive situations with regard to exercise of powers under section 263, read with Explanation 2(a) thereto, with respect to lack of proper inquiries and verifications. The first situation could be this. Even if necessary inquiries and verifications are not made, the Commissioner can, based on the material before him, in certain cases straight away come to a conclusion that an addition to income, or disallowance from expenditure or some other adverse inference, is warranted. In such a situation, there will be no point in sending the matter back to the Assessing Officer for fresh inquiries or verification because an adverse inference....