TaxTMI 
TaxTMI 
2022 (1) TMI 626
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ex-parte. 3. We have gone through the order of the ld. Pr. CIT and we find that the ld. Pr. CIT found the order passed by the Assessing Officer in the present case u/s 143(3) of the Act to be in error for having accepted the explanation of the assessee of the source of bogus share capital surrendered during survey, without conducting any independent inquiries and verifying the same. He noted from the records that the assessee had been subjected to survey on 25-26 Feb, 2014, during the course of which he had admitted to bogus share capital, share application money and unsecured loan introduced in the assessee company and surrendered an amount of Rs. 1 crore for the impugned assessment year. He noted that the assessee had also agreed to disallow depreciation on bogus addition to fixed assets amounting to Rs. 18,78,925/- for the impugned year. Ld. Pr. CIT noted that during assessment proceedings, the assessee had explained that the source of the bogus share capital was the money infused from the payment made by it to various firms/individuals on account of bogus expenditure which was capitalized. The Pr. CIT found that the Assessing Officer accepted this explanation of the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... He accordingly set aside the order passed by the Assessing Officer with a direction to frame assessment afresh particularly after making proper inquiries on the impugned issue. The findings of the ld. Pr. CIT at para 4 to 6 of the order is as under. "4. During the course of proceedings u/s. 263 of the Act the assessee was asked to explain the link between the bogus expenditure, its payment to the concerned parties and its re-routing to the accounts of the Directors, relatives, etc., from where the funds were routed to the account of the company. Shri Alpesh Gandhi, Director of the company attended on 28/03/2018 and contended that the issue was discussed by the Assessing officer during the course of assessment proceedings and all details were submitted in support of the, same., the assessee filed copies of submissions dated 20/04/2015, 09/06/2015, 01/01/2016, 30/01/2016 & 12/03/2016. On perusal of the same, it is seen that assessee has submitted before the Assessing officer the details of the parties related to the bogus expenditure along with the details of disbursement of the amounts, their withdrawals by the parties concerned, names of the parties in whose accounts the mone....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e opportunity of being heard to the assessee." 5. Aggrieved by the same, the assessee has come up in appeal before us raising the following grounds:- "1. On the facts and in the circumstances of the case, the learned Principal CIT erred in assuming his jurisdiction u/s. 263 of the I.T. Act, whereas the mandatory conditions for assuming such jurisdiction are totally absent, with the result that the impugned order passed u/s.263 is bad in law. 2. On the facts and in the circumstances of the case, the learned Principal CIT erred in arriving at a conclusion without any basis whatsoever to the effect that the reassessment order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue. 3. On the facts and in the circumstances of the case, the learned Principal CIT erred in assuming jurisdiction u/s. 263 of the I.T. Act since the AO has taken a possible view after examining and considering the reply and arguments of the assessee as rendered during the course of reassessment proceedings. 4. On the facts and in the circumstances of the case, the learned Principal CIT erred in cancelling the assessment order passed by the Assessing Offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bogus share capital/share application/ unsecured loan , but had explained the manner of introducing the same by way of booking bogus expenditure and rerouting the payment made on account of the same in the form of share capital etc giving all details of the modus operandi ,including the name of parties involved in the same and the dates of the entire money trail. Thus a full and complete disclosure was made by the assessee, who had come completely clean with regard to the bogus transactions undertaken, revealing all possible details of the same. 6.5 Nothing has been pointed out by the Ld. Pr. CIT in the above explanation and the details filed by the assessee, so as to raise any suspicion regarding the same. With the disclosure being so complete in all aspects and there being nothing to doubt the same, the acceptance of the explanation by the AO, we find ,in the present circumstances cannot be said to be out of place or unreasonable. 6.6 In the said backdrop the contention of the Ld. Pr. CIT that the AO should have inquired and verified the entire explanation of the assessee, going to the extent of verifying whether the claim of bogus expenditure booked on capital account was cor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wever, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between 'lack of inquiry' and 'inadequate inquiry'. If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has different opinion in the matter." The High Court in the said decision further went on to observe that : "There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed." In the case of CIT vs Anil Kumar (2010) 194 Taxman 504 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee, they have used assessee's address for correspondence, especially with the Government for timely communication. These persons are eligible under s. 44AD to file their returns under presumptive scheme of taxation. All these persons were produced before the AO in revision proceedings and no question was put to them though their statement on oath was recorded. All these persons have confirmed in revision proceedings that the money was not returned by them to any person and have been used for their personal benefit. The payments were made to these persons by banking challans (channels) and tax was deducted at source in accordance with law. The assessee has also given complete details with respect to labour expenses called for in assessment proceedings. These details were duly verified by the AO with the books and records. No adverse observation was made by the AO and hence, no addition was made in the regular assessment. The AO has also randomly selected two labourers and examined them and their statements were recorded under s. 131 of the Act. Since all necessary details were furnished by the AO (assessee), there was no reason for the CIT to invoke the revisional jurisdiction ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 263 of the Act does not authorize or give unfettered powers to the Commissioner to revise each and every order. That revision proceedings cannot be initiated if the assessing officer has passed the order after carrying out inquiries which a reasonable and prudent officer would have carried out. The relevant findings are as under: 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 enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried ou....