2020 (1) TMI 129 - AT - Income Tax

Revision u/s 263 - addition u/s 68 - Unverified unsecured loans taken - HELD THAT - An Explanation-2 has been inserted by Finance Act 2015 in Section 263 with effect from 01/06/2015 to declare that order shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue if in the opinion of appropriate authority-(1) the order was passed without making inquiries or verifications which should have been made; (ii) the order is passed allowing any relief without inquiring into the claim; (iii) the order is not in accordance with any direction or instructions etc. issued by the Board u/s 119; or (iv) the order was not in accordance with binding judicial precedent. Applying the stated principles to the factual matrix and after going through the replies submitted by the assessee during the course of regular assessment proceedings we concur with the submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no application of mind by Ld. AO on the issues which formed subject matter of revisional jurisdiction u/s 263. Therefore we do not find any illegality in the action of Ld. Pr.CIT in exercising the said jurisdiction. Final directions of Ld. Pr.CIT to be erroneous to some extent. It is noted that there was blanket set-aside of the quantum assessment order overlooking the fact that the addition of Rs. 7.50 Lacs as made by Ld.AO in the quantum assessment order had already attained finality and there would be no occasion to revisit the same in revisional jurisdiction since the quantum assessment order could not be said to be prejudicial to the interest of the revenue to that extent. AO is directed not to delve into the verification of loan of Rs. 7.50 Lacs stated to be obtained from M/s Reiva Sarees. Proceeding further we are of the considered opinion that it was incumbent on the part of Ld. Pr.CIT to appreciate the assessee s submissions in the correct perspective. Pr. CIT in the show-cause notice has observed that unsecured loans obtained from certain entities remained to be verified. However the loan obtained from Anuj Gems (wrongly referred to as Anju Gems) was only a brought forward loan which was repaid by the assessee during the year. Therefore there could be no occasion to consider the same from the point of view of addition u/s 68. Therefore Ld.AO directed to restrict the verification with respect to remaining two entities viz. Dharam Oberoi Diyas Productions Private Limited. We direct so. Provisions of Sec.2(22)(e) would not be applicable against loans obtained from M/s Suchitra Homes Entertainment (I) Pvt. Ltd. since the confirmation on record would show that the said loans were merely brought forward loans and there were no fresh receipts of loans during the year. Therefore the order could not be termed as erroneous or prejudicial to revenue to that extent. Accordingly this issue would not form part of revisional assessment proceedings. So far as excess of grant of TDS is concerned it would suffice to direct Ld. AO to grant due TDS credit as per law in revisional assessment proceedings since as per assessee s submissions the assessee in fact has been granted short TDS credit. Applicability of Sec.43B on professional tax is factual one. The Ld. AO is directed to verify the same during revisional assessment proceedings.The directions issued by Ld. Pr.CIT stand modified to that extent.

Summary

Issues Involved:
1. Validity of revisional jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Verification of unsecured loans from specific parties.
3. Applicability of Section 2(22)(e) concerning loans from Suchitra Home Entertainment (I) Pvt. Ltd.
4. Grant of excess TDS credit.
5. Applicability of Section 43B on professional tax.

Issue-wise Detailed Analysis:

1. Validity of Revisional Jurisdiction under Section 263:
The assessee contested the correctness of the revisional jurisdiction invoked by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263. The Pr. CIT issued a show cause notice due to perceived lapses in the assessment order, specifically citing lack of inquiry on certain issues. The Tribunal upheld the Pr. CIT's invocation of revisional jurisdiction, stating that the assessment order was erroneous and prejudicial to the interest of the revenue due to lack of inquiry. The Tribunal referred to judicial precedents, including Malabar Industrial Co. Ltd. V/s CIT and CIT V/s Vikas Polymers, to emphasize that an order is deemed erroneous if it is not in accordance with law and prejudicial to the revenue.

2. Verification of Unsecured Loans:
The Pr. CIT observed that unsecured loans from certain entities remained unverified. The assessee provided loan confirmations during the assessment proceedings, but the Pr. CIT found the explanations unsatisfactory. The Tribunal noted that the Assessing Officer (AO) did not adequately inquire into the unsecured loans during the assessment. The Tribunal directed the AO to verify the loans from Dharam Oberoi and Diyas Productions Private Limited but excluded the loan from Reiva Sarees, which had already been added in the quantum assessment and attained finality.

3. Applicability of Section 2(22)(e):
The Pr. CIT questioned the applicability of Section 2(22)(e) concerning loans from Suchitra Home Entertainment (I) Pvt. Ltd. The assessee argued that the loans were not received during the year under consideration. The Tribunal agreed with the assessee, noting that the loans were brought forward and not fresh receipts during the year. Therefore, the provisions of Section 2(22)(e) were not applicable, and this issue was excluded from the revisional assessment proceedings.

4. Grant of Excess TDS Credit:
The Pr. CIT concluded that the AO allowed excess TDS credit without proper inquiry. The assessee argued that the TDS credit was granted short, not excess. The Tribunal directed the AO to grant due TDS credit as per law during the revisional assessment proceedings.

5. Applicability of Section 43B on Professional Tax:
The Pr. CIT raised concerns about the applicability of Section 43B on professional tax due to lack of evidence of actual payment. The Tribunal directed the AO to verify the payment of professional tax during the revisional assessment proceedings.

Conclusion:
The Tribunal upheld the revisional jurisdiction under Section 263 to the extent of lack of inquiry by the AO on specific issues. However, it modified the directions of the Pr. CIT, excluding certain issues from the revisional assessment proceedings and providing specific instructions for verification. The appeal was partly allowed, and the order was pronounced in the open court on January 2, 2020.