AI Drafter 
TaxTMI 
TaxTMI 
2024 (12) TMI 431
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....are being taken up together. 2. We shall take up the case of Manojbhai Padaliya in ITA No.1045/Ahd/2024 for AY 2013-14, which shall serve as the lead assessment year and our observations for this year would be applicable to the case of other assessee's and other assessment years as well. The assessee has raised the following grounds of appeal: 1. In law and in the facts and circumstances of the Appellant's case, the impugned order u/s. 263 passed by the Ld. CIT is bad in law and deserves to be quashed. 2. In law and in the facts and circumstances of the Appellant's case, the Ld. CIT has erred in holding that the assessment order was passed without making enquiry in respect of transactions carried out with M/s V. Nitin and Kiran Gems Pvt. Ltd. and on that ground, invoking provisions of Section-263 of the Income Tax Act. 2.1 The Ld. CIT has failed to appreciate that the Assessing Officer had made inquiry in respect receipt from M/s V Nitin and M/s Kiran Gems Pvt. Ltd. and after considering the explanation given to him accepted genuineness of receipts. Thus, the assessment order was not erroneous and prejudicial to interest of revenue. The differe....
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.... 6. Before us, the first contention of the Ld.Counsel for the assessee is that on perusal of notice u/s. 263 of the Act, it is evident that there is no specific allegation as to how the assessment order was erroneous and prejudicial to the interest of the revenue. Secondly, the Ld.Counsel for the assessee drew our attention on the reasons recorded for re-opening the assessment u/s. 147 of the Act and pointed out that the very reason for re-opening the case of the assessee u/s. 147 of the Act was that the assessee was a beneficiary of suspicious transaction with Mr. V Nitin & M/s.Kiran Gems Pvt Ltd. and the assessee was required to furnished details of unexplained credits in his bank account of Rs. 1,64,28,519/- from Mr. V Nitin and M/s.Kiran Gems Pvt. Ltd. The Ld.Counsel for the assessee drew our attention to objection filed against the issuance of notice u/s. 147 of the Act dated 06.12.2021. Further, the Ld.Counsel for the assessee drew our attention to the notice issued u/s. 142(1) of the Act dated 17.12.2021 issued by the AO, wherein at para no.2(iv) of the questionnaire, the assessee was asked to furnished the source of huge credits amounting to Rs. 1,64,24,519/- in his bank a....
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....unting to Rs. 1,50,95,178/- an addition was made u/s. 68 of the Act. However, in our considered view in order to invoke the provisions of section 263 of the Act, the foundation/ basis of initiation of 263 proceedings must emanate from the findings given by the AO in his assessment order of the assessee itself and 263 cannot be initiated on the basis of "borrowed satisfaction" (i.e on the basis of findings in assessment done in case of a third person). Therefore, in our considered view, the very basis of initiation of 263 proceeding in the present case is fallacious and for this reason u/s. 263 proceedings are liable to be set-aside. 9. Secondly, we observe from the contents of the 263 order that the Ld.PCIT has not given any specific findings or observation nor has pointed any defect in the assessment order so as to make the assessment order erroneous and prejudicial to the interest of Revenue. Further, there is also no specific observation in 263 order that there was any lack of inquiry by the AO, during the course of assessment proceedings. It would be useful to reproduce the relevant extract of the 263 order for ready reference. On careful consideration of relevant f....
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.... (iv) The assessee has brought on record that reassessment order has been passed in case of V. Nitin and Kiran Gems Pvt. Limited for year under consideration wherein no addition for labour payment made to assessee has been disallowed. 4.1 It is observed that notice under Section 263 of the Act was issued mainly on the ground that in reassessment order passed in one of the labour contractors being Mr. Mahendra Mathukiya for AY 2013-14, addition under Section 68 was made whereas assessee has brought on record that in subsequent year, order under Section 148A(d) for AY 2014-15 was accepted in the case of the, same contractor. The assessee has further claimed that when labour payment has been found to be genuine in the case of V. Nitin and Kiran Gems Pvt Limited for year under consideration, then same labour receipt in the hand of assessee contractor cannot be disallowed considering it to be non genuine particularly when in other labour contractors case as referred by assessee, same is allowed. In light of above referred submission and evidences filed by assessee, the Assessing Officer is directed to verify above referred facts and if it is found that order under Section 1....