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2019 (5) TMI 697 - HC - Income TaxRevision u/s 263 by CIT - genuineness of the capital introduced in the names of the partners - As per CIT No enquiry for ascertaining the genuineness of the loan to which AO has failed to apply his mind - ITAT reversed the order the CIT, Alwar - HELD THAT - ITAT held that it was not a case where Assessing Officer completed the assessment without conducting necessary and proper enquiries. The issue raised by the Pr.CIT has been considered by the assessing Officer at the time of assessment and the assessee has submitted evidences and details in support of its claim made in P L account. Therefore, in his view, the order passed by the AO U/s 143(3) of the Act on 24/3/2014 was not an erroneous order, which could be said to be prejudicial to the interest of the revenue We are inclined to concur with the view expressed by the ITAT as the order of assessment indicate that the AO has made enquiry on various issues and assessee submitted the details therefor. The enquiry pertained to the remuneration of the partners and the expenses/receipts. The Assessing Officer enhanced the return income of the assessee of ₹ 2,99,820/- to ₹ 4,55,556/- by making additions out of the various expenses. The nature of the assessment order does not bring the case of the revenue within the purview of Section 263 as such order cannot be said to be prejudicial to the interests of Revenue - Decided in favour of assessee.
Issues:
Challenging order of Income Tax Appellate Tribunal, Enhancement of trading income, Proper enquiry by Assessing Officer, Genuineness of loans and capital introduced, Application of mind by Assessing Officer, Creditworthiness of lenders, Prejudicial to the interests of Revenue, Interpretation of phrase "prejudicial to the interests of the Revenue." Analysis: The appeal under section 260A of the Income Tax Act, 1961 was filed to challenge the order of the Income Tax Appellate Tribunal Jaipur, which had allowed the appeal by the respondent-assessee, reversing the order of the CIT, Alwar. The Assessing Officer had enhanced the trading income by making additions to various expenses, leading to a notice issued by the CIT invoking revisional power. The CIT found the assessment order prejudicial to the interests of Revenue due to lack of proper enquiry on various issues. The respondent-assessee's contentions were not upheld, emphasizing the need for a thorough investigation into the sources of money and genuineness of loans. The CIT concluded that the Assessing Officer had not applied his mind adequately, making the order erroneous and prejudicial to revenue. Regarding the genuineness of capital introduced in partners' names, the Assessing Officer's lack of inquiry and verification was highlighted. The creditworthiness of lenders was not properly examined, rendering the order erroneous and prejudicial to revenue. The ITAT, however, disagreed with the CIT's view, emphasizing that the Assessing Officer had conducted necessary enquiries and considered materials before reaching a conclusion on the assessment. The ITAT found no error in the order passed by the Assessing Officer under section 143(3) of the Act, setting aside the CIT's order. The High Court concurred with the ITAT's view, noting that the Assessing Officer had indeed made inquiries on various issues, including partners' remuneration and expenses/receipts. The enhancement of the assessed income by the Assessing Officer was based on these inquiries and due application of law and facts. The nature of the assessment order did not meet the criteria for being prejudicial to the interests of Revenue under Section 263 of the Income Tax Act. The judgment referred to the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, emphasizing that an erroneous order causing the Revenue to lose tax lawfully payable would be prejudicial to its interests. The interpretation of the phrase "prejudicial to the interests of the Revenue" was discussed, highlighting that every loss of revenue due to an Assessing Officer's order could not be deemed prejudicial unless unsustainable in law. The High Court found no infirmity in the ITAT's order, dismissing the appeal as it did not raise any substantial question of law.
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