TaxTMI 
TaxTMI 
2023 (2) TMI 419
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....ce to the judgment of Hon'ble SC in the case of Cognizance for Extension of Limitation, In reported in 125 taxmann.com 151 where it was held as under: 2. In cases where the limitation would have expired during the period between 15-3-2020 till 14-3-2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15-3-2021. In the event the actual balance period of limitation remaining, with effect from 15-3-2021, is greater than 90 days, that longer period shall apply. 2.1 In view of the above, we condone the delay in filing the appeal by the assessee and proceed to adjudicate the issue on merit. 2.2 The only issue raised by the assessee is that the learned PCIT erred in holding the assessment framed under section 143(3) of the Act as erroneous insofar prejudicial to the interest of the Revenue. 3. The brief facts are that the assessee is an individual and declared the income of Rs. 6,69,25,280/- only. The return of the assessee was selected for limited scrutiny and assessment was framed under section 143(3) of the Act dated 06-12-2017 at Rs. 6,88,26,540/- only. 4. The learned PCIT on examination of the assess....
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.... Co-operative housing society, the ledger copy and confirmation along with bank statement were furnished before the AO from which it can perused that the account of Shivalik Co-operative is a running account where there was opening loan, repayment and fresh loan received during the year. Thus the primary onus was duly discharged cast under section 68 of the Act by the assessee, therefore there is no error in the order of the AO which caused prejudice to the revenue. 6. However, the ld. PCIT disagreed with the submission of the assessee and revised the order of the AO under section 263 of the Act being erroneous insofar prejudicial to the interest of Revenue by observing as under: "3.5 In view of the above discussion, my own appraisal of the facts of the case is noted as under:- 1) The assessee has filed the single page copy of the bank statement of Shri S.N. Shah HUF wherein the credits and debits of three transactions of Rs.1,50,00,000/- are reflected. The borrowed fund has been further given as loan and advance to the family members/family concerns. The A.O. failed to make necessary inquiry as to whether Shri S.N. Shah HUF has the creditworthiness of providing the loans whic....
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....ry actions at their end and he himself has wrongly satisfied about the genuineness of these loan transactions. 3.7 Considering all these facts and circumstances of the case as appraised above, the assessment order passed u/s 143(3) of the Act dated 06.12.2017 is held to be erroneous in so far as it is prejudicial to the interest of the revenue and therefore is set-aside u/s 263 of the Act together with its explanation no. 2 so as to further hold that the impugned assessment order was passed without making inquiries or verification which should have been made by the Assessing Officer. 3.8 The Assessing Officer is directed to make the following specific inquiries while deciding issues of taking loans from the above-mentioned two persons so as to conclude as to whether the loan transactions were genuine and these two persons had capacity(creditworthiness) to advance these loans or not:- a) To call for the details of the sources of amounts deposited in the bank accounts of both the above-mentioned persons before the amounts were transferred to the account of the assessee. b) To call for the copies of accounts viz, balance-sheet and profit & loss account for the financial year e....
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....mentary evidences were placed. Thus, the learned AR contended that there cannot be said that the assessment order is erroneous and causing prejudice to the interest of Revenue in the given facts and circumstances. 9. On the contrary, the learned DR vehemently supported the order of the ld. PCIT. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessment order has been passed by Ld. AO without making inquiries or verification with respect to the credit of unsecured loan received from the parties as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue and thus requiring revision by Pr. CIT u/s 263 of the Act. 11. An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. I....
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....words:- "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 provison 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 out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conduct....
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.... are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: "Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed" 17. From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the 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 interests of the revenue, for example, wh....
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.... letter duly signed by the assessee as per provision mentioned u/s.288(2). 18.1 In response to the above notice, the assessee has made the reply vide letter dated 28-11-2017 as reproduced below: "1. {Sr. No. 2(vii)(1)} Unsecured loan from persons who have filed their return of income. In this regard for your honour ready reference we are submitting herewith ledger confirmations, Acknowledgement of return of Income along with bank statements of the persona from whom unsecured loan taken during the year as per Exhibit-I." 19. The assessee in response thereto files certain detail such as copy of ledger, confirmation, bank statement in case of both the creditors. The assessee furnished copy of PAN, and ITR in case of creditor namely S.N Shah HUF. All these details are placed on pages 77 to 101 of the paper book. From the above it is revealed it is not the case that the AO has not made any enquiry. Indeed, the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of credit of loan taken. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on ....