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2023 (9) TMI 1207 - AT - Income TaxRevision u/s 263 - non-verification of loans taken from four directors - HELD THAT - We find that the loans from four directors were verified during the assessment proceedings by the AO by calling for information/details from the assessee. We note that the opening balance coming from the earlier years from these directors was Rs. 4,81,81,000/- whereas a sum of Rs. 3,17,00,000/- was taken from the four directors during the year. The assessee has filed before the AO all the evidences such as copy of financial statements, ITRs, bank statements and confirmations from the directors which were examined by the AO and these loans were accepted. We have also perused the copies/evidences filed before us and based on our examination and analysis, we are of the considered view that the revisionary jurisdiction and order passed u/s 263 of the Act in respect of this is not correct and can not be sustained. Whereas in respect of remaining item no. (ii) loans from M/s Original Dealcom were taken and from M/s Kalyan Securities Pvt. Ltd. and qua non-deduction of TDS on the difference of expenses we find this issue is not verified by the AO and the assessment order can be said to be erroneous and prejudicial to the interest of the revenue to this extent only. Accordingly we are inclined to modify the revisionary order passed u/s 263 of the Act by relying on the decision of Hon ble Calcutta High Court in the case of Commissioner of Income-tax v. Polar Fan Industries Ltd. 1991 (5) TMI 24 - CALCUTTA HIGH COURT Accordingly the revisionary order u/s 263 is modified and only treated as valid in respect of item no. (ii), (iii) (viii). Appeal of the assessee is partly allowed.
Issues Involved:
1. Validity of exercise of jurisdiction by the PCIT under Section 263 of the Income Tax Act, 1961. 2. Verification of loans from directors and other entities. 3. Verification of profits from Commodity Trading and Foreign Currency Trading. 4. Verification of sale of scrap and write-off of capital assets. 5. Non-deduction of TDS on certain expenses. Summary: 1. Validity of Exercise of Jurisdiction by PCIT under Section 263: The appeal challenges the order of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The PCIT's order set aside the assessment order of the Assessing Officer (AO) and directed a fresh assessment due to perceived errors and prejudicial interests to the revenue. 2. Verification of Loans from Directors and Other Entities: The PCIT noted the AO's failure to verify the identity and creditworthiness of four directors who advanced loans totaling Rs. 3.17 crores, as well as loans from M/s Original Dealcom Pvt. Ltd. and M/s Kalyan Securities Pvt. Ltd. The Tribunal found that the AO had verified the loans from directors by examining financial statements, ITRs, bank statements, and confirmations. However, the AO did not verify the loans from M/s Original Dealcom Pvt. Ltd. and M/s Kalyan Securities Pvt. Ltd., making the assessment order erroneous and prejudicial to the revenue for these items. 3. Verification of Profits from Commodity Trading and Foreign Currency Trading: The PCIT observed that the AO did not verify profits from Commodity Trading in Foreign Currency (Rs. 1,49,88,621.26) and Commodity Trading in cotton (Rs. 50,78,728.92). The Tribunal noted that these profits were disclosed under "other non-operating income," and no prejudice was caused to the revenue. Therefore, the jurisdiction exercised by the PCIT on these items was deemed invalid. 4. Verification of Sale of Scrap and Write-off of Capital Assets: The PCIT pointed out the AO's failure to verify the sale of scrap amounting to Rs. 21,72,315/- and the write-off of capital assets amounting to Rs. 1,13,39,000/-. The Tribunal found that the sale of scrap was disclosed under "other non-operating income," and the write-off was discussed in detail by the AO based on a valuer's report. Hence, the PCIT's jurisdiction on these items was invalid. 5. Non-deduction of TDS on Certain Expenses: The PCIT observed that the AO did not consider the non-deduction of TDS on expenses amounting to Rs. 39,06,289/-, which should have been disallowed under Section 40(a)(ia) of the Act. The Tribunal agreed that this issue was not verified by the AO, making the assessment order erroneous and prejudicial to the revenue. Conclusion: The Tribunal held that the PCIT's revisionary jurisdiction under Section 263 was not valid for issues related to loans from directors, profits from Commodity Trading and Foreign Currency Trading, sale of scrap, and write-off of capital assets. However, the jurisdiction was valid for the issues related to loans from M/s Original Dealcom Pvt. Ltd., M/s Kalyan Securities Pvt. Ltd., and non-deduction of TDS on certain expenses. The appeal was partly allowed, and the revisionary order under Section 263 was modified accordingly. Order Pronounced: The order was pronounced in the open court on 16th June, 2023.
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