TaxTMI 
TaxTMI 
2024 (8) TMI 118
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....total income of Rs. 10,36,390/-. Subsequently, the case of the respondent was selected for scrutiny and accordingly notice under Section 143 (2) and 143 (1) of the Act was issued on 03.09.2014 and 08.05.2015, respectively and an order dated 03.12.2015 was passed by the assessing officer assessing total income at Rs.11,56,390/- against the return income of Rs.10,36,390/-. Subsequently, the Commissioner of Income Tax issued a suo motu revision proceeding against the respondent Assessee under Section 263 of the IT Act on following grounds: "During the course of examination of the records, it has been noticed that there is huge rotation of money amongst relatives without payment or receipt of interest. The assessee has raised loans from the relatives aggregating to Rs. 6,75,08,220/-. Financial dealings amongst the relative/group firms appears to be transformation of income in the hands of recipients of loan from the capital advanced by others, independent verification of such transaction had not been done by the assessing officers. None verification of this issue has rendered the assessment order erroneous and prejudicial to the interest of revenue. Accordingly, notice unde....
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....without appreciating the fact that the Assessing Officer had failed to examine the genuineness of unsecured loans despite the fact that the case was selected under CASS for the reason "large increase of unsecured loans" and the assessing officer passed the order u/s 143(3) dated 03.12.2015 without making inquiries or verification which should have been made and accordingly the said order passed by the AO was erroneous in so far as it is prejudice to the interest of the revenue within the meaning of explanation 2(a) of sub- section 2 of section 263 of the I.T. Act. b) The Learned ITAT was not justified in holding that the assessing officer had duly verified the genuineness of unsecured loans, especially when the depositors in question were prima facie not creditworthy to lend huge unsecured loans to the respondent assessee. c) The Learned ITAT has erroneously held that the A.O. had duly verified the genuineness of unsecured loans, especially when pursuant to the order u/s 263 of the income tax act, 1961; the assessment order, had resulted in addition of Rs 2,51,22,019 u/s 68 owing to the failure of the assessee in proving the genuineness of unsecure loans in term o....
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....fication of loan obtained by the Assessee from various relatives. For brevity relevant part of the impugned order is quoted herein below: "13. ............... During the scrutiny proceedings, the AO issued notice u/s 142(1) of the Act, 1961 dated 8th May 2015 and again on 9 July, 2015 where the AO has specifically asked the assessee to furnish the following documents and evidences (a) Source and details of introduction of capital with evidence (b) Reasons for increase of unsecured loans with evidence (c) All Bank account statements for FY 2012-13 (relevant to this assessment year) (d) Audit Report and Balance sheet as on 31.03 2013 and for earlier 31 03 2012. We note that all the above noted requisition of the AO as per requirement was duly furnished by the assessee, vide letter dated 29.07.2015. From the above documents, it can be safely presumed that the AQ has duly applied his mind for verification of the Loans obtained by the assesse from various relatives. ............ We note that if the AO has passed a short order, without much discussion and detail reasons, but it is clear from the records that there has been....
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....03.12.2015 as erroneous and prejudicial to the interest of the revenue. 15. In any event we note that the Assessing Officer has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue the said decision of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the revenue as held by Hon'ble Supreme Court in Malabar Industries Ltd vs CIT (supra). Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is "null" in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 22.03.2018, being ab initio void. In the result, the appeal filed by the assessee is allowed". 8. Before deciding the issue involved in the instant appeal; at the outset it is observed that Section 263 confers suo motu power of revision on the CIT. The different set....
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....mmissioner that there is huge rotation of money amongst relatives without payment of receipts of interest. The Assessee has raised loans from the relatives aggregating to Rs.6,75,08,220/-. Financial dealing amongst the relatives/group firms/companies appeared to be transformation of income in the hands of recipient of loans from the capital advance by others. The learned commissioner has further observed that independent verification of such transaction had not been done by the assessing officer and non-verification of this issue has rendered the assessment order erroneous and prejudicial to the interest of revenue and accordingly he issued notice to the respondent. Pursuant to that, the Assessee filed a detailed reply specifically indicating therein that all requisition of the AO as per requirement was duly furnished by the Assessee and therefore it can be safely presumed that the AO has duly applied his mind for verification of loans obtained by the Assessee from various relatives and has duly examined the same and passed the assessment order. 10. The learned commissioner after going through the aforesaid reply has held as under (Relevant portion is extracted for the ord....
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....n on the issue. It is also evident that pursuant to the order of remand a fresh assessment order has also been passed by the AO under Section 143 (3) read with Section 263 of the IT Act for the relevant assessment year assessing the total income as Rs.2,62,78,410/-. Thus, prima facie it appears that there was a loss of revenue as in the first assessment order the total income assessed by the assessing officer was only Rs.11,56,390/-. It further transpires from the 1st assessment order dated 03.12.2015 that the issue of source and details of introduction of capital has not at all dealt with by the then AO. As a matter of fact, the learned Commissioner had given some details that the AO has failed to make proper enquiries; relevant part has already been quoted herein above. 12. The learned ITAT in its order, the relevant part of which is quoted herein above, has noted that the Assessee has complied with all the requisitions made by the then AO as per requirement vide letter dated 29.07.2015 and thus it can be safely presumed that the AO has duly applied his mind for verification of loan obtained by the Assessee from various relatives. However, from the 1st assessment orde....
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....r to the assessee." Thus, by conjoint perusal of 1st assessment order and the order passed under Section 263 it is evident that the CIT has categorically observed that one Rajesh Chourasia has declared income of Rs. 4,25,598/- only for the relevant assessment year and thus, prima facie on the basis of return of income the creditworthiness of advancing such huge amount of loan has not been established by the Assessee. 13. The learned ITAT in its order at para 14 has held that the Assessee has produced relevant materials and offered explanation in pursuance of the notice issued to him and after considering those materials and explanation, the AO has come to a definite conclusion. This observation of the learned Tribunal appears to be perverse, inasmuch as, the then AO has not uttered a single word with regard any enquiries and/or verification made by him in order to ascertain the claim of the Assessee regarding the source and details of introduction of capital. So, it cannot be said that on the said issue he came on a definite conclusion. As a matter of fact, the learned Tribunal has utterly failed to consider the amendment made in section 263 of the Act by incorporating Explan....
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....sided nor carried on any business from the address given in the return, that the Income Tax Officer was not justified in accepting the initial capital, the sale of ornaments, the income from business, the investments, etc. "without any enquiry or evidence whatsoever and that the order of assessment was erroneous and prejudicial to the interests of revenue. In response to the aforesaid notice, the assessee showed cause on June 24, 1963 and after considering the objections of the assessee, the Commissioner passed an order cancelling the assessment for 1960-61 and directing the Income Tax Officer to make a fresh assessment according to law after making enquiries with regard to the jurisdiction and the business carried on by the assessee, the possession of initial capital, acquisition and sale of ornaments, purchase of plot of land and resources and the money invested in the name of the assessee. In his order the Commissioner held that the assessments made by the Income Tax Officer were made in post haste without making any enquiry or investigation into that antecedents of the assessee. He further held that on enquiry it had been ascertained that the Income Tax Officer, 'J' Ward, Distr....