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2021 (10) TMI 455 - AT - Income TaxRevision u/s 263 by CIT - case was selected for scrutiny - assessee had voluntarily surrendered a sum on account of discrepancies found in the books of account and inflated expenditure - PCIT s main thrust was that the A.O. had without proper verification and examination of records has accepted the claim of the assessee - HELD THAT - Capital Account was not directly impacted by amount surrendered. The proposition of ld. PCIT calling for reduction in debtors or creditors from surrendered amount is beyond comprehension. As per facts, the assessee is a Civil Contractor and the awarders are to be corporate or Govt. Departments. They may figure in the list of sundry debtors, but then how the amount of sundry debtors can be reduced as a result of surrender. The AO after due examination and verification subjected the surrendered income of ₹ 1.15 Crore to tax at the flat rate of 30% by invoking the provision of Section 115BBE. In this respect, a detailed discussion at page No. 7 and para 7 of the A.O. is mentioned and penalty to this effect has also been initiated, therefore, we are of the view that this issue has been examined by A.O. and thus no proceedings U/s 263 could have been invoked. Assessee has obtained unsecured loans from 22 parties but creditworthiness or none of them was verified by the A.O. - After examining the entre records and after hearing the parties, we have also found that AO after having examined all the details had not drawn any adverse inference against any loan creditors and did not follow a view 'unsustainable in law' and thus, in our view, the assessment order was not the result of non-application of mind or any inadequate enquiry, therefore, in these circumstances, the invocation of jurisdiction U/s 263 was untenable and unsustainable in law. The courts across the spectrum have unanimously held that the order of AO can be brandished as erroneous if it is unsustainable in the eyes of law - Unexplained money received from FDRs - From the perusal of bank statement, it is obvious that the immediate source of money given to the asseesee as unsecured loan was the proceeds realized by Virendra Agarwal HUF from the FDRs. Thus, in this way, the money received from FDRs constituted the source of unsecured loan given to the assessee but the Ld PCIT doubted that the creditworthiness of the cash creditor in light of partly return of income showing income of ₹ 94,426. IN this regard, we also noticed that it was not the present income but it was the accumulated savings of the past years of the Virendra Agarwal HUF invested in the form of FDR became the source to the assessee. The ITR of Shri Virendra Agarwal (Individual) is also on record wherein an income of ₹ 31.50 Lacs has been shown in his return of income. Therefore, in the light of the entire facts and circumstances, the allegation that Mr. Virendra Agarwal was not having the creditworthiness, is baseless and unfounded. TDS has not been deducted on the interest paid to the mentioned persons and without obtaining Form No. 15G/H, the A.O. should have disallowed the claim of interest expenses - As we found that From 15G and 15H were submitted on 28/04/2016 with the department. In this regard, the copy of the acknowledgement has also been placed on record, thus in this way, there was no liability to deduct TDS. Since, Form 15G/H are already available on record, therefore, no disallowance was made by AO on account of Non deduction of TDS. Apart from this, the Chartered Accountant in TAR has not pointed out any disallowance u/s 40(a)(ia) of Income Tax Act on account of Non deduction of TDS. Therefore, we are of the view that the order passed by the ld. PCIT on this issue is bad in law. Unsecured loans received - Amount was received by way of loan by the wife of the assessee Smt. Sunita Agarwal. The reason behind the existence of Narration TO YS AC RTGS in both the transaction involving the assessee and his wife is the fact that the assessee is Prop of M/s Yash Trading Corporation and his wife is Prop of M/s Yogesh Enterprises. The cash credits were received by both of them in the bank account of their respective proprietorship concern. Therefore, the nomenclature in the narration are same. Apart from this, from the Bank statement it is obvious that the immediate source of unsecured loan of ₹ 10 lakhs to Rekha Verma was the money received by her from M/s Jaishree Products on 09.05.2015 for ₹ 3 Lacs and on 11.05.2015 for ₹ 7 Lacs through account payee cheques. Thus, in this way, the entire source of unsecured loans of ₹ 10.00 lacs stands proved. Since, the current income didn't constitute the source of unsecured loan, therefore, the comparison of current income with the amount of unsecured loan does not have any meaning and relevance. Thus, after considering the facts, we are of the view that the order passed by the ld. PCIT is unsustainable. AO had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course of his assessment work. Even ld. PCIT has not specified as to what type of enquiry ought to have been made by the A.O. which would have resulted into income or disallowance or any other adverse action, therefore, in such circumstances, the order passed by the A.O. cannot be branded as erroneous and prejudicial to the interest of revenue, therefore, we set aside and quash the order passed u/s 263 of the Act. - Decided in favour of assessee.
Issues Involved:
1. Legality of the Principal Commissioner of Income Tax (PCIT) setting aside the Assessing Officer's (AO) order. 2. Establishment of pre-requisite conditions for invoking revisional provisions under Section 263 of the Income Tax Act. 3. Verification of the surrendered amount as business income. 4. Verification of unsecured loans from 22 parties. 5. Creditworthiness of Virendra Agarwal HUF. 6. Non-deduction of tax on interest payments. 7. Loan transactions with Smt. Rekha Verma. Issue-wise Detailed Analysis: 1. Legality of PCIT Setting Aside AO's Order: The assessee argued that the PCIT's order setting aside the AO's assessment was erroneous as the AO had conducted proper verification and examination of records. The Tribunal found that the AO had indeed verified the surrendered amount and subjected it to tax under Section 115BBE at a flat rate of 30%. The AO's assessment included a detailed discussion and initiation of penalty, indicating thorough examination. Therefore, the Tribunal held that the PCIT's invocation of Section 263 was not justified. 2. Establishment of Pre-requisite Conditions for Invoking Revisional Provisions: The Tribunal emphasized that for the PCIT to invoke Section 263, the AO's order must be both erroneous and prejudicial to the interests of the Revenue. The Tribunal found that the AO had made all necessary inquiries and verifications, thus fulfilling his duty as a prudent and responsible public servant. The Tribunal cited several judicial precedents to support the view that an order cannot be deemed erroneous if the AO has taken one of the possible views permissible in law. 3. Verification of Surrendered Amount as Business Income: The PCIT alleged that the AO accepted the assessee's statement without proper verification. However, the Tribunal found that the surrendered amount was correctly included in the profit and loss account, increasing the profit for the year. The AO had also taxed this amount at a flat rate of 30% under Section 115BBE. Therefore, the Tribunal concluded that the AO had examined this issue adequately, and the PCIT's order was unfounded. 4. Verification of Unsecured Loans from 22 Parties: The PCIT contended that the AO did not verify the creditworthiness of the parties from whom the assessee obtained unsecured loans. The Tribunal found that the AO had examined all necessary documents, including signed account statements, bank accounts, and ITRs of the parties. The AO found no cash deposits in the creditors' accounts and verified that the funds came through banking channels. The Tribunal held that the AO's inquiries were sufficient and the PCIT's order was not justified. 5. Creditworthiness of Virendra Agarwal HUF: The PCIT questioned the creditworthiness of Virendra Agarwal HUF, who had provided loans to the assessee. The Tribunal found that the AO had verified the ITR, confirmation, and bank statement of Virendra Agarwal HUF. The source of the loan was proceeds from FDRs, and the Tribunal noted that the funds came from accumulated savings, not current income. Thus, the Tribunal found the PCIT's doubts baseless and the order unjustified. 6. Non-deduction of Tax on Interest Payments: The PCIT alleged that the assessee failed to deduct TDS on interest payments. The Tribunal found that the assessee had submitted Forms 15G and 15H, which were acknowledged by the department. The Chartered Accountant's Tax Audit Report (TAR) also did not point out any disallowance under Section 40(a)(ia) for non-deduction of TDS. Therefore, the Tribunal concluded that the PCIT's order was erroneous. 7. Loan Transactions with Smt. Rekha Verma: The PCIT claimed that the assessee received a total loan of ?15 lakhs from Smt. Rekha Verma, instead of ?10 lakhs as shown. The Tribunal found that the AO had verified the ITR, computation, bank statements, and confirmation of accounts of all creditors, including Smt. Rekha Verma. The Tribunal noted that the additional ?5 lakhs was a loan received by the assessee's wife, not the assessee. The source of the ?10 lakhs loan from Smt. Rekha Verma was verified through her bank statements. The Tribunal held that the PCIT's assumptions were incorrect and the order was unsustainable. Conclusion: The Tribunal concluded that the AO had conducted all necessary inquiries and verifications. The AO's order was based on one of the permissible views in law, and the PCIT's invocation of Section 263 was not justified. The Tribunal set aside and quashed the PCIT's order, allowing the assessee's appeal.
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