TaxTMI 
TaxTMI 
2025 (5) TMI 20
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....sessment order passed by the assessing officer has not applied his mind and not conducted any inquiry /verification in respect (1) applicability of section 23(5) of the Act and there by not offering notional rental income on unsold flats and(2) payment of interest on negative capital of partner as per clause of partnership deed. The order passed by PCIT requires to be quashed and may kindly be quashed. 4. The learned Pr. CIT erred on facts as also in law in setting aside the assessment order dated 08.04.2021 passed u/s 143(3) of the Income Tax Act, 1961, directing the assessing officer to pass afresh assessment order. The order passed u/s 263 of the Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed. 5. Your Honour's assessee craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal. 3.The relevant material facts, as culled out from the material on record, are as follows. The assessee, before us, is a partnership firm and had filed return of income on 19/09/2018, declaring Nil Income. The Assessment u/s 143(3) read with sections 143(3A)& 143(3B) of the Incom....
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....sment to the tune of Rs. 84,86,212/-. Considering such facts, notice u/s 263 of the Income-tax Act, 1961, dated 01/03/2024,was issued and duly served upon the assessee. The show cause notice is reproduced by the ld PCIT in the revision order under section 263 of the Act on page no. 2 to 3. 6. In response to above notice, the assessee has filed its reply before learned PCIT stating that assessment order under consideration passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue nor is in the domain of proceedings u/s 263 of the Act. The assessee stated that first of all, the assessment has been finalized under the faceless e-assessment scheme. In this regard assessee stated that in the Union Budget 2019, the finance minister proposed the introduction of a scheme of Faceless e-assessment. The scheme seeks to eliminate the human interface between the taxpayer and the income tax department. The scheme lays down the procedure to carry out a faceless assessment through electronic mode. From 13th August 2020, the e-assessment scheme of 2019 stands amended and hence known as the Faceless Assessment Scheme. Briefly this scheme was brought to help the....
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....act that no inquiry or sufficient inquiry was not conducted by the assessing officer, during the assessment proceedings. The Ld. Counsel stated that assessing officer has conducted the inquiry and examined the documents and evidences submitted before him by the assessee during the assessment proceedings. Therefore, the assessee's case cannot be considered in the category of "No Inquiry". What extend the inquiry should be conducted by the assessing officer, is to be decided by the assessing officer only, and it is the prerogative of the assessing officer to conduct further enquiry or not. The Ld. Counsel further submitted that during the revisionary proceedings, the Ld. PCIT has mainly raised two issues; Viz: one is unsecured loans given to family members and other depositors without charging interest, which has resulted under assessment, as per learned PCIT, to the tune of Rs. 1,09,21,304/. The other issue, which the Ld. PCIT has raised, is the notional rent income under the head "House Property" u/s. 22 r.w.s.23 of the Act, which has resulted into under assessment, as per learned PCIT, to the tune of Rs. 84,86,212/-. 11.About the first issue, regarding unsecured loan, without cha....
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....er hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the ld.PCIT, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 14.We have carefully considered the facts of the case, the submission of the Learned Counsel for the assessee and ld DR for the Revenue and evidences on record. Before us, the assessee submitted the following documents and evidences: i. Copy of notice issued u/s. 142(1) of the Act dated 10.12.2020 by assessing officer. ii. Copy of reply dated 04.01.2021 filed before assessing officer. iii. Copy of balance sheet, schedule of partner's capital, Unsecured loan and current liabilities. iv. Copy of building completion certificate dated 30.01.2017 & 28.06.2017. 15. During the assessment proceedings, the assessing officer issued notice under section 142(1) of the Act dated 10th December 2020, wherein the assessing officer has specially raised the questions, about the issue raised by the learned PCIT. The relevant portion of the notice under section 142(1) of the Act is reproduced below. "8. As per Col.23 of Form 3CD, payments amounting to Rs. 548433/- were made to persons specified u/s 40....
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....on Withdrawal Profit & Loss Closing Balance 1 Natubhai Bhatu (13,923,926) 37,509,999 84,500,000 52,028,339 (8,885,588) 2 Hamir (49,436,182) - 13,800,000 52,028,339 (11,207,843) 3 Rajesh Bhatu (345,762) 12,358,293 12,455,524 1,061,803 618,810 4 Kishorbhai Chavda (280,309) - - 1,061,803 781,494 5 Total (63,986,179) 49,868,292 110,755,524 106,180,284 (59,410,939) From the above table your honour will appreciate that the total withdrawal of the partners is out of the profit/sales generated during the year, 5) During the year under consideration the firm has repaid term loan of ICICI Bank Ltd. A copy of the loan statement and No due Certificate is enclosed herewith for your perusal. A statement of Secured car Loan of Rs. 77,91,697/- is also enclosed herewith. As per Q-005 Documents filed) 6 Please find enclosed herewith detail of unsecured loans, party PAN No. and address along with copy of confirmation from the party. It may be noted that unsecured loans of Rs. 22,78,71,303/-have also been paid off. (As per Q-006 Documents filed) 7) During the year under consideration a sum of Rs. 14,71,24,965/- has been pai....
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....so attached herewith for your perusal. (As per Q-010 Documents filed) 11) Not Applicable. The sales transaction of Rs. 2,64,60,13,950/- does not belong to us. Please furnish more details if any. 12) Please find herewith: * Detail of total built up area constructed and sold upto 31/3/2018. * detail working of Opening Stock as on 1/4/2017 * detail working of Closing Stock as on 31/3/2018 (As per Q-012 Documents filed) 13) Please find break up of cost included in the stock valuation above". 17.We find that in the course of assessment proceedings, the assessing officer, vide notice u/s 142(1) of the Act, dated 10.12.2020, has called for voluminous details covering 25 points which include the justification of borrowed money and payment of interest etc. Copy of the notice dated 12.12.2020 is attached as Annexure-1 in the paper book of the assessee. The assessee, in turn, vide para 3 to 8 of assessee`s letter dated 04.01.2021, has categorically explained the details of opening balance and subsequent transactions in partners cases and the receipts/payments of all other loan and advances etc. The copy of reply dated 04.01.2021, is attached as Annexure-2, in the paper book of ....
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.... end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.] 19.In the present case, the completion certificates were issued on 30.01.2017 and 28.06.2017 and as such the cooling period is not over during the assessment year under consideration and hence the assessee is not required to offer any property income from this stock in trade. 20. We note that, Hon`ble Supreme Court in the case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd [2020] 114 taxmann.com 545 (SC), dismissed the Revenue's SLP holding that 263 proceedings are invalid when assessing officer 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 availabl....
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....erroneous by the ld.PCIT, simply because, according to him, the order should have been written more elaborately [CIT v. Gabriel India Lid. [1993] 71 Taxman 585 (Bom.)).Two pre-requisites must be present before the PCIT, who can exercise the revisional jurisdiction conferred on him. First is, that the order passed by the ITO must erroneous. Second is that the error must be such that it is prejudicial to the interests of the Revenue. If the order is erroneous but it is not prejudicial to the interests of the Revenue, the Commissioner cannot exercise the revisional jurisdiction u/s 263(1) [H. H. Maharaja Raja Pawer Dewas v. CIT [1982]. 24. Let us take the guidance of judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer'....