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2019 (8) TMI 897 - HC - Income TaxRevision u/s 263 - SCN issued by CIT regarding genuineness credit worthiness of investment in share capital, unsecured loans, creditors and expenses - objection filed by assessee was accepted by CIT except unsecured loans and creditors - HELD THAT - In the present case, the CIT himself while relying upon the reply submitted by the assessee had partially accepted the claim as far as investment in share capital was concerned but it did not accept the documentary evidence and reply submitted by the assessee before the AO as far as unsecured loans and creditors are concerned. AO after issuing notice and raising certain queries to the assessee passed the assessment order which cannot be called as erroneous. After the notice was issued by the AO raising 28 queries from the assessee, which was also replied by him along with the documentary evidence in regard to each of the query, thus the assessment order passed u/s 143(3) would not render the same as erroneous and prejudicial to the interest of Revenue, unless the Commissioner exercising power u/s 263 brings on record to show that the order of the AO is erroneous, as the same was passed without application of mind or the AO had made an incorrect assessment of fact or incorrect application of law, but the same not being the case, and the CIT relying upon the reply and the documentary evidence submitted by the assessee granted partial relief, as such the order dated 09.02.2012 passed u/s 263 relegating back the matter to the AO as regards unsecured loans and creditors is unsustainable. Thus it is abundantly clear that the order passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act. 2. Validity of the CIT's order under Section 263 without addressing the appellant's explanations. 3. Whether the assessment order was erroneous and prejudicial to the interest of revenue. Detailed Analysis: 1. Jurisdiction of the Commissioner of Income Tax (CIT) under Section 263: The appeal questions whether the CIT correctly assumed jurisdiction under Section 263 of the Income Tax Act to revise the assessment order dated 15.12.2009. The CIT issued a notice on 27.10.2010 and, after considering the assessee's objections, passed an order on 09.02.2012. The CIT partially accepted the assessee's objections regarding investment in share capital but directed the Assessing Officer (AO) to re-examine unsecured loans and creditors. The ITAT upheld the CIT's order, leading to the present appeal. 2. Validity of the CIT's Order under Section 263 Without Addressing the Appellant's Explanations: The assessee argued that the CIT's order under Section 263 was passed without properly considering the detailed explanations and documentary evidence submitted in response to the AO's 28 queries during the assessment proceedings. The assessee contended that the AO had accepted the return after thorough scrutiny and that the CIT's assumption of non-application of mind by the AO was incorrect. The CIT relied on the Supreme Court's decision in Malabar Industrial Company vs. CIT, which outlines that an order can only be revised under Section 263 if it is both erroneous and prejudicial to the interests of the revenue. 3. Whether the Assessment Order Was Erroneous and Prejudicial to the Interest of Revenue: The CIT and the Department's counsel argued that the AO's assessment order was silent on the verification of unsecured loans and creditors, which should have been examined for identity, creditworthiness, and genuineness. The CIT's order directed the AO to re-examine these aspects, suggesting that the AO's original order lacked sufficient inquiry. However, the assessee maintained that all necessary details were provided and scrutinized by the AO, and the absence of detailed discussion in the assessment order does not imply non-application of mind. Court's Findings: The court analyzed the requirements for invoking Section 263, emphasizing that the order must be erroneous and prejudicial to the revenue. It referenced multiple judgments, including Malabar Industrial Company vs. CIT, CIT vs. Krishan Capbox Ltd., and CIT vs. Mahendra Kumar Bansal, to support the view that mere non-discussion in the assessment order does not justify revision under Section 263 if the AO had indeed scrutinized the details. The court found that the AO had issued notices and raised queries, which were duly replied to by the assessee with documentary evidence. The CIT's partial acceptance of the assessee's submissions regarding share capital but not unsecured loans and creditors was insufficient to deem the AO's order erroneous. The court concluded that the CIT failed to demonstrate how the AO's order was erroneous and prejudicial to the revenue. Conclusion: The court held that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. Consequently, the orders of the ITAT and the CIT under Section 263 were set aside. The court answered the question of law in favor of the assessee and allowed the appeal without any order as to costs.
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