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2022 (4) TMI 97 - AT - Income TaxValidity of Revision u/s 263 - contravention of CBDT Circular No. 19 of 2019 - HELD THAT - We find that Circular no. 19/2019 issued on 14th August, 2019 provided that to maintain proper audit trail of communication the Central Board Of Direct Tax (CBDT) in exercise of its power under section 119 of the Act has directed that no communication have been issued by income tax authorities relating to assessment, appeals, orders, statutory or otherwise, exemptions, inquiry, investigation, verification of information, penalty, prosecution, rectification and approval etc. to the assessee or to other person on or after the 1st October, 2019 shall have a computer generated document identification number allotted and is duly quoted in the body of such communication Learned PCIT-8, Mumbai passed the order under section 263 of the Act on 10th March, 2021 - It does not contain any DIN and further any of the six paragraphs in her order shows that this communication is issued manually without having DIN as it falls in any of the exceptions, and any permission has been taken from the respective authorities. CBDT also issued press release explaining the above mechanism on PRESS RELEASE, DATED 14-8-2019 . On 11 March, the ld PCIT sent a communication stating intimation letter for order under section 263 dated 11 March 2021 stating, this is to inform you that order under section 263 of the Act dated 11th March, 2021 is having document No. (DIN) ITBA/REB/M/REB5/ 2020- 2021/ 1031404838(1).) This communication states that DIN for order passed under section 263 of the Act dated 11th March 2021 has some DIN. Surprisingly, no order was passed under section 263 of the Act in case of the assessee on 11th March 2021. Impugned order was as passed on 10th March 2021. Therefore, it is apparently clear that the order passed by the learned PCIT on 10/03/2021 was in clear violation of the instructions of Central Board Of Direct Taxes vide circular no. 19/2019 dated 14th August, 2019. For this reason, the order passed by the learned PCIT deserves to be quashed. Unsecured loans - In absence of any independent bank account of M/s Sri Gopikrishna Trust no information is available about whether loan given by sources from sources of the corporate trustee or by the trust. Thus, sources of funds belonging to Gopikrishna Trust were also not clear. Thus, it is clearly demonstrated by the ld PCIT That the learned Assessing Officer has not made any inquiry worth its name about above loan. Mere disclosure in tax audit report does not show creditworthiness and genuineness of the loans. Further in factual matrix of assessee s meager share capital, loan not commensurating with the financial of assessee, clearly needs proper examination of loans by ld AO . In view of this issue, we find that the learned Assessing Officer has failed to make any inquiry and therefore, the Ld PCIT after making due inquiries has correctly assumed the jurisdiction under section 263 of the Act. Ld PCIT carried out her own inquiry and set aside the matter back to the file of the learned Assessing Officer. Outstanding other payables as well as loans and advances - The assessee tried to explain before the Assessing Officer with respect to the schedules in the balance sheet along with names of the parties on 5th October, 2017. The letters dated 26th October 2017 submitted by the learned Authorized Representative vide page No. 26 of the paper book. The assessee vide letter dated 8th November, 2017 page 68 of paper book stated details about serial No. 39 schedule details of payment made to ICRA and further vide serial No.42 submitted the copy of the Term sheet and agreement for loans and advances to Piramal Estate Pvt. Ltd. and Shri Hari trust. It also submitted agreement dated 2nd June 2014 before the Assessing Office . Thus the finding of the ld PCIT that assessee did not submit necessary details before the ld AO. is devoid of any merit. The learned Assessing Officer carried out due inquiries on this issue and therefore order of the learned Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue on this aspect. As we have already held that order of learned PCIT on the issue of other payables and loans and advances is not sustainable in law. Therefore, There is no requirement of adjudicating about proper opportunity of hearing granted to the assessee by the learned PCIT. Appeal of assessee allowed.
Issues Involved:
1. Validity of the order passed under section 263 of the Income-tax Act, 1961 without mentioning the Document Identification Number (DIN). 2. Legitimacy of invoking provisions of section 263 by the Principal Commissioner of Income Tax (PCIT) and setting aside the assessment order as erroneous and prejudicial to the interest of the revenue. 3. Adequacy of inquiries conducted by the Assessing Officer (AO) regarding unsecured loans, other payables, and loans and advances. Detailed Analysis: 1. Validity of the Order Passed Without Mentioning DIN: The assessee argued that the order passed by the PCIT under section 263 of the Act was invalid as it did not mention any DIN, contravening CBDT Circular No. 19 of 2019. The circular mandates that all communications issued by income tax authorities must have a computer-generated DIN. The PCIT's order dated 10th March 2021 lacked a DIN and did not include any exceptions or approvals for not including a DIN. Consequently, the Tribunal found that the order was in clear violation of the CBDT instructions and deserved to be quashed on this ground alone. 2. Legitimacy of Invoking Section 263 Provisions: The PCIT invoked section 263, holding that the assessment order passed by the AO was erroneous and prejudicial to the interest of the revenue. The assessee contended that the PCIT did not provide a reasonable opportunity to be heard and failed to conclusively prove that the AO's order was erroneous. The Tribunal examined the procedural aspects and determined that the PCIT did not follow due process, particularly concerning the adjournment request and the inclusion of issues not mentioned in the original show cause notice. Despite these procedural lapses, the Tribunal found merit in the PCIT's substantive findings regarding the unsecured loan from M/s Sri Gopikrishna Trust. 3. Adequacy of Inquiries Conducted by the AO: - Unsecured Loans: The PCIT noted that the AO failed to adequately verify the unsecured loan of ?68,55,000 from M/s Sri Gopikrishna Trust, which had a corpus of only ?1 lakh. The AO did not conduct third-party inquiries or verify the source of the funds. The Tribunal agreed with the PCIT that the AO's inquiry was insufficient, as merely accepting details from the tax audit report without further verification did not establish the creditworthiness and genuineness of the loan. - Other Payables and Loans and Advances: Regarding other payables of ?13,48,320 and loans and advances of ?3,27,83,970, the PCIT claimed that the AO accepted these amounts without proper inquiry. However, the Tribunal found that the assessee had provided necessary details and explanations to the AO, who had conducted due inquiries. Therefore, the Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the revenue on this aspect. Conclusion: - The Tribunal quashed the PCIT's order under section 263 due to the violation of the CBDT circular regarding the DIN requirement. - On merits, the Tribunal upheld the PCIT's findings regarding the unsecured loan from M/s Sri Gopikrishna Trust, deeming the AO's order erroneous and prejudicial to the revenue. - The Tribunal found that the AO had conducted adequate inquiries regarding other payables and loans and advances, thus there was no error in the AO's order on these issues. Final Decision: The appeal of the assessee was allowed, and the order passed by the PCIT under section 263 was quashed.
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