2023 (4) TMI 800

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....pal Commissioner of Income tax was not correct and therefore the consequential impugned order passed being bad in law is liable to be quashed. 4. There was no erroneous order at all so as to cause any prejudice to the interest of revenue. There being no earlier erroneous order, the impugned order passed U/s. 263 of I.T. Act, 1961 has no legs to stand and is to be quashed. 5. The Assessing Officer having passed the original order on application of mind and after considering all the issues, the present impugned order passed by Principal Commissioner of Income tax is only passed on account of change of opinion and merely change of opinion does not give any jurisdiction U/s. 263 of I.T. Act, 1961 and therefore also the impugned order deserves to be quashed. 6. The conclusion of the Principal Commissioner of Income tax that no inquiries were made by the Assessing Officer while passing the original order is also against the facts of the case and evidence available. Therefore also the impugned order is liable to be quashed. 7. The very fact that the Principal Commissioner of Income tax has set aside the assessment order with a direction to redo the asse....

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.... on 17.10.2017 declaring total income at Nil. The return was selected for scrutiny and notice u/s. 143(2) was issued to assessee in response to which assessee had filed details of investment and source of investment and other details with regard to investment in share by the assessee. 4.2 The Ld.AO after examining the details accepted the return of income filed by assessee. Subsequently, the Ld.PCIT issued notice u/s. 263 of the act on 28.02.2022. For sake of convenience, the same is scanned and reproduced as under : 4.3 The Ld.AR submitted that the 263 proceedings were initiated on two grounds: 1) To verify the payment made by assessee amounting to Rs.18,06,650/- to a party by the name M/s. Valmark Realty Holding on 03.09.2016 that was not reflecting in the balance sheet or P&L account of the assessee. Also that assessee had received a sum of Rs.18,10,000/- from M/s. Avant Garde Fashion wear Pvt. Ltd. on 01.09.2016 as loans and advances out of which the amount of Rs.18,06,650/- was transferred to M/s. Valmark Realty Holding. It was also observed by the Ld.PCIT that assessee holds 62,240 shares of M/s. Avant Garde Fashion wear Pvt. Ltd. being 32.02% of share holdings....

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.... to the assessee, which has been raised in the notice issued u/s. 263 of the act. He submitted that, merely filing of various details like financials, annual reports would not constitute or lead to the conclusion that there has been application of mind by the Ld.AO. He thus submitted that the 263 proceedings initiated is in accordance with law. It is also submitted by the Ld.DR that no prejudice is caused to the assessee as the Ld.PCIT has directed the Ld.AO to verify and carry out necessary enquiries based on the explanation furnished by the assessee. We have perused the submissions advanced by both sides in the light of records placed before us. 7. We note that admittedly no specific query has been raised by the Ld.AO on the two issues that are subject matter of 263 proceedings. We also note that in respect of the cash deposits during the demonetisation period, the Ld.AO has not followed the circulars issued by the CBDT to carry out necessary verifications in respect of the genuineness of cash deposited by the assessee during the relevant time. 7.1 Admittedly, the assessee accepted the SBNs which were no longer a legal tender and were to be explained in accordance with t....

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....y the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Accordingly, we direct the Ld.AO to verify the cash deposited in the light of the above circular by granting proper opportunity of being heard to the assessee. 7.6 In sofar as the issue of applicability of provisions of section 2(22e) is concerned, the queries raised by the Ld.AO do not indicate that there is an application of mind in respect of the money paid by assessee to M/s. Valmark Realty Holding and the money deposited by M/s. Avant Garde Fashion wear Pvt. Ltd. with assessee. The share holding of assessee in M/s. Avant Garde Fashion wear Pvt. Ltd. is also not been a subject matter of verification by the Ld.AO. The Ld.AR submitted that assessee is a NBFC and therefore advancing of loans is a regular activity on day-to-day basis. It was thus submitted that provisions of section 2(22e) will not attract to a NBFC company. Very pertinently the Ld.AO has also not looked into whether assessee is a NBFC or not. 7.7 We di....

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....our case. Please refer to the assessment order u/s 143(3) for AY 2017-18 in your case. The scrutiny assessment was completed u/s 143(3) of the IT Act on 20.11.2019 accepting the income at NIL as shown in your return. It is observed that your case has been selected for scrutiny for the A.Y 2017-18 to verify "expenses incurred for earning exempt income" and "investments/advances and loans 1. On perusal of the details available on record, it is noticed that: i. You have filed the Return of Income for A.Y 2017-18 showing NIL income. The AO completed the scrutiny assessment accepting the returned income. ii. On perusal of the bank account, it is noticed that you had made payment of Nota: digitally signed, the date of digital signature may be taken as date of document BMTC BUILDING, FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU, Kamataka, 560095 Email: BANGALORE.PCIT2GINCOMETAX.GOV.IN, Note:-The website address of the e-filing portal has been changed from yoww.incometaxindiafiling.gov.in to www.incometax.gov.in DIN-Document identification No. Document 2 Rs.18,06,650/- on 03.09.2016 to a party viz M/s Valmark Realty ....