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TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 810
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....t for the impugned assessment year 2017-18 had already been concluded by Assessing officer (AO), u/s 143(3) of the Act, after seeking explanations and making all the enquiries necessary for the completion of assessment. Appellant prays order so passed u/s 263 may please be held as bad in law. 2. That the PCIT has failed to appreciate that the assessment order was neither erroneous nor prejudicial to the interest of the revenue and thus order u/s 263 is bad in law, illegal, ultra-vires, in excess of and/or in want of jurisdiction and otherwise void. That the order u/s 263 setting aside already completed assessment as made by the Assessing Officer u/s 143(3) of the Income Tax Act is based upon incorrect assumption of fact which cannot render the order erroneous. Furthermore, inaction of AO towards inadequate enquiry cannot be said to be prejudicial to the interests of the revenue. Therefore, the mandatory twin conditions of section 263 are not fulfilled. 3. That the Ld. PCIT has erred in invoking clause (a) of explanation 2 of section 263(1) of as the explanation does not authorize unfettered powers to the CIT to revise each and every order passed by the AO. 4. That on the f....
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....e was no prima facie satisfaction recorded by the PCIT on the basis of material available on record and on the basis of reply submitted by the assessee that the order passed by AO was erroneous and prejudicial to the interest of revenue. 10. That the order passed u/s 263 is without jurisdiction because the PCIT has travelled on issue of capital contribution by the partners, and which is not flagged in the notice u/s 143(2). That the PCIT has no jurisdiction to convert the limited scrutiny into complete scrutiny by invoking the provisions of section 263. 11. That the appellant craves leave to add, amend, or alter any of the above grounds of appeal before or during the course of appellate proceedings." 2. Tersely, we advert, the fact of the case that the assessee is a partnership firm and the dealer of the liquor. The assessment was completed u/s 143(3) of the Act. The notice u/s 263 was issued by the ld. PCIT and the details submission was filed by the assessee against the show cause notice & finally the ld. PCIT had set aside two issues for further verification before the ld. AO considering the assessment order erroneous & prejudicial to the revenue. Primarily the set aside....
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....ion of the assessee without taking note of the fact that the information as called for by him had not been furnished. The AO also did not make any independent or requisite enquiries or verifications regarding the source, financial capacity of the creditors or of the genuineness of transactions as were called for in the facts and circumstances of the case. III). The squared-up loans were as under: Name of the creditor Amt. taken during the year Amt. returned during the year Closing balance Naresh Aggarwal 80,00,000 15,00,000 65,00,000 Gautam Construction Co 75,00,000 75,00,000 nil Prem Arora 40,00,000 40,00,000 nil (IV) Vide questionnaire dated 17.10.2019 at point no.3, the assessee was asked by the AO to furnish the following: "Complete details of unsecured loans including squared up accounts with opening and closing balances and sources / copy of accounts for amounts received during the year. Give complete address and PAN of depositors". In response, a reply was received on 14.11.2019 in which the assessee filed copies of ledger accounts of the creditors in its own books of account. Details were given in a table as below. No PANs of the creditors were gi....
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....statements / other accounts of the partners were not examined to see as to how the credit balances had built up in these accounts from where large capital contribution was made by the partners. (XIII). Thus the source of the large capital of Rs.37,63,96,365/- introduced in the books of the assessee firm under the head Capital introduction by the partners remained unverified though the AO had initiated queries in this regard by asking the assessee to explain sources of addition to partners' capital accounts vide notice u/s 142(1) dated 17.10.2019. The assessment is thus erroneous and prejudicial to the interest of revenue. 5. As mentioned above, the assessment has been concluded In this case by the Assessing Officer without carrying out the necessary enquiries and verifications on the issue flagged under CASS for which the case had been selected for scrutiny, as well as other issue as the case was selected for complete scrutiny as mentioned in paras above. 6. In view of above, the assessment order passed by the Assessing Officer on 24.12.2019 is held to be erroneous in so far as it is prejudicial to the interest of revenue in terms of provisions contained in clause (a....
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.....12.2019 for AY 2017-18 [Refer Page no. 75-77]. The relevant question raised by the assessing officer in the questionnaire (Relevant Page no 77)is being re-produced for your ready reference: - "Please furnish copies of ledger account in all the concerns where you are a partner/director". 2.1 In response to the same, the partner Sh. Harpreet Singh Gulati furnished capital account along with the cash book during assessment proceedings to substantiate the course of capital investment being made during the year under consideration. The copy of reply is enclosed at page no. 80of the paper book. 2.2 The copy of cash book as submitted during the assessment proceedings of the partner Harpreet Singh Gulati duly submitted before the PCIT under proceedings u/s 263 is enclosed for your ready reference. (Refer page no. 81 to 291 of the paper-book) 3. Your Honour will appreciate that the investment made by the partner has duly been reflected in the audited balance sheet submitted before the PCIT and submitted before the AO of the partner. Pleases refer page no 242. The complete audit report is enclosed at page no 305 to 311. 4. ....
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.... after the reply to such questionnaire was furnished. Therefore, in no circumstance, it can be said that the order is erroneous or prejudicial to the interests of the revenue. A.D. Enterprises P Ltd AAHCA5833H 22,51,20,000 1. In this regard we are enclosing here with the copy of assessment order for the AY 2017-18 duly submitted before worthy PCIT in reply to notice u/s 263. (Refer page no. 366--373 relevant page no 372-373). 2. That during the assessment proceedings of the partner M/s A.D. Enterprises P Ltd was asked to explain the source of investment made in Hoshiarpur Traders. It was submitted by the partner that the same was made out of cash sales of Rs. 112 crore out of Total sales of Rs. 729 crores. The copy of reply of submitted to AO is enclosed at page no. 405 to 407. The copy of same was also submitted to before PCIT and therefore the PCIT was well versed with the fact that the enquiry of capital investmentby A.D. Enterprises P Ltd had duly been verified by the concerned AO. 4. That the assessee has also furnished date-wise capital account to the PCIT and the copy of the same is enclosed at page no 374-375.Furthermore, th....
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....f the paper book) 3. Furthermore, the assessee also submitted copy of cash book of GautamAggarwalto substantiate the source of capital investment made. The copy of the cash book submitted before PCITis enclosed at page no. 488- 541 of the paper book. 4.6 The following details were submitted by the assessee before both the revenue authorities in relation to the source and creditworthiness of the partners; a) Copy of cash book APB page nos. 81 to 94. b) Audited balance sheet APB page nos. 2 to 42. c) APB page nos. 305 to 311 and date wise investment APB page nos. 312 to 316. 4.7 In further argument the assessee submitted the following judicial ruling which is as follows: "i. Judgment in the case of Principal Commissioner of Income-tax v. Vaishno Devi Refoils & Solvex reported in [2018] 96 taxmann.com 469 [SC) SUPREME COURT OF INDIA and the relevant portion is reproduced below: "Section 68 of the Income-tax Act, 1961 - Cash credit (Firm/partner, in case of) - Assessment year 2010-11 - For relevant year, Assessing Officer made addition to income of assessee-firm under section 68 on account of capital introduction by one partner of firm - He was of view ....
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....er did not accept explanation of 'K' that apart from being a partner of assessee firm, she had income from interest and other sources, which were declared under Amnesty Scheme and added said amount to income of firm on account of cash credit - Tribunal, however, accepted assessee's plea that once partner, accepted having made deposits, no addition could be made in firm's income and held that no case was made out for addition to income of assessee-firm, even if deposits made with firm by partner were unexplained income of partner - Whether Tribunal was justified in holding so - Held, Yes" iv. Judgment in the case of Commissioner of Income-tax v. Burma Electro Corpn. [2003] 126 TAXMAN 533 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA IT APPEAL NO. 101 OF 1999 dated AUGUST 9, 2000 [Refer page no. 13-15 of judgement paper book] and the relevant portion is reproduced below: "Section 68 read with section 260A, of the Income-tax Act, 1961 - Cash credits - Assessment year 1989-90 Assessing Officer made additions to returned income of assessee-firm on account of unexplained cash credits in capital accounts of some partners - Tribunal deleted additions on ground that ....
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....lated to the amount raise through unsecured loan. The ld. Counsel further argued that both in assessing authority and before the Revisional Authority the assessee has submitted the details related to the loan creditors. 6. The ld. Counsel first draw our attention in APB pages 667 to 676 the submission of information before the PCIT in further argument the following details was submitted: Name of Party Address Document submitted before AO Documents submitted before PCIT Prem Arora AHNPK7425P 55, Blue City Colony, Meera Court, Loharka Road, Amritsar 1. Copy of Income Tax Return for Asstt. Year 2017-18 (please refer page 45 of the paper book) 2. Ledger account of Prem Arora in the books of Hoshiarpur Traders (please refer page no. 551 of the paper book) 3. Confirmation from Prem Arora that he has received advance from Hoshiarpur Traders (please refer page 44 of the paper book). It was clarified to the PCIT that unsecured loans was never raised but the advance was given to Prem Arora and the same was returned back. The relevant portion of reply submitted before the PCIT is reproduced below: "As regard Prem Arora it is most respectfully submitted that th....
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....of the paper book. 3. The affidavit of Sh. Naresh Aggarwal was also submitted before the PCIT in which it has been clarified by Sh. Naresh Aggarwal that the amount of Rs. 80 lacs has been remitted out of opening bank balance maintained with Capital Small Finance Bank. Please refer page 677 of the paper book. 4) Copy of ITR of Naresh Aggarwal for AY 2015- 16 declaring income of Rs 1103580/- Please refer page no 687. 5)Copy of bank statement for FY 2015-16 Please refer page no The ld. Counsel for the assessee respectfully relied on the judicial findings which are as below: CIT, Faridabad v. Laul Transport Corporation [2009] 180 Taxman 185 (Punjab & Haryana) CHANDIGARH BENCH CIT v. Mark Hospitals (P.) Ltd. [2015] 58 taxmann.com 226 (Madras) `Garima Polymers (P.) Ltd. v. ACIT, Central Circle-16, New Delhi[2021] 131 taxmann.com 4 (Delhi - Trib.) Mod Creations (P.) Ltd. v. Income-tax Officer [2011]13 taxmann.com 114 (Delhi) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2002-03 - During relevant assessment year, assessee-company had raised unsecuredloans from five persons who were its directors and shareholders - Payments were made th....
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.... and SST - Held, yes - Whether, therefore, impugned addition under section 68 made to income of assessee was to be deleted - Held, yes [Paras 13 to 16] [In favour of assessee] 7. The ld. CIT-DR vehemently argued & relied on the order of revisional authority. But unable to bring any contrary fact in relation to the submission of the assessee. 8. We heard the rival submission and relied on the documents available in the record. The entire finding of the revisional authority was not on any cogent material. The assessment was completed by a process of verification on which the assessee had completely participated. After the thoughtful consideration of the case, we observed that the observation of the revisional authority is related to lack of investigation by the assessing authority related to creditworthiness & genuineness of transaction related to assessee with partners & loan creditors. The assessee in its support had complied the requirements as raised by both the revenue authorities. Though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Onc....
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....ion 263 - Held, yes - Whether, therefore, impugned order of Tribunal was to be upheld - Held, yes SMT. ANITA MALPOTRA V. ITO 109 TTJ 76 (ITAT, Amritsar) Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2001-02 - Against assessment order passed by Assessing Officer, Commissioner passed order under section 263 on grounds that Assessing Officer had failed to make enquiry/investigation about expenditure incurred on electricity and production obtained, and that production was required to be worked out by taking into account decision in case of Sant Stone Crusher (P.) Ltd. order dated 19-9-2005 in IT Appeal No. 185/(Asr.) 2005 - However, facts revealed that during assessment proceedings, Assessing Officer had examined and test checked books of account, copies of electricity bills and other documents produced by assessee and had duly discussed each item of income and expenditure with assessee - Whether in such circumstances, it could not be said that assessment was completed without any enquiry - Held, yes - Whether further, since there is no universal formula/standard that production in all cases would be same/constant,....