2023 (10) TMI 846 - AT - Income Tax

Revision u/s 263 - Addition u/s 68 - As per CIT AO passed a cryptic order accepting the returned income as nil as per declaration of assessee - as alleged no enquiries whatsoever had been found to have been made in respect of the identity, creditworthiness and genuineness of the loans and advances - HELD THAT - AO has passed a very brief and cryptic order. However, in the body of the order he has mentioned that specific query were raised regarding two issues viz. (i) large increase of unsecured loan during the year and low income in compression to high amounts of loan, advances and investment in shares and noted that in response to notices AR of assessee attending proceedings and after taking on record necessary details, explanation and evidences returned income at Nil was accepted. We are unable to see any endeavour exercise by the AO regarding verification, examination and adjudication of both the issues were picked up for scrutiny assessment proceedings even from the statement of facts we are unable to see details of any notice either u/s. 142(1) or any other provisions of the Act except notices dated 19.09.2017 u/s. 133(6) of the Act to sister concerns (2) of assessee. Even despite service of notice the assessee is not representing and perusing his case before this Tribunal. AO accepted returned income of assessee without any verification and examination of both the issues therefore it is a clear case of inadequate and insufficient enquiry. PCIT was quite justified and correct in alleging the assessment order as erroneous and prejudicial to the interest of revenue by following the preposition rendered in the case of Shri Amitabh Bachhan 2016 (5) TMI 493 - SUPREME COURT . Decided against assessee.

Summary

Issues involved:
The issues involved in this case are related to the revisionary order passed under section 263 of the Income Tax Act, 1961, regarding the acceptance of unsecured loans and advances by the assessee company during the assessment year 2015-16.

Issue 1: Challenge to Revisionary Order

The assessee challenged the revisionary order passed by the Principal Commissioner of Income-tax-1, New Delhi, under section 263 of the Act. The assessee contended that the loans and advances from group companies were genuine and duly accepted by the Assessing Officer after independent inquiry under section 133(6) of the Act. The assessee argued that the assessment order was not erroneous and prejudicial to the interest of Revenue. However, the Principal Commissioner directed a fresh denovo assessment order, disagreeing with the assessee's contentions.

Issue 2: Lack of Verification and Enquiries

The CIT(DR) supported the revisionary order, stating that the assessment order lacked required enquiries and verifications regarding the unsecured loans and advances shown by the assessee. The CIT(DR) argued that the assessment order was erroneous and prejudicial to the interest of Revenue as the Assessing Officer accepted the explanations without proper verification. The Principal Commissioner directed the Assessing Officer to reframe the assessment order after proper verification of facts and providing a hearing to the assessee.

Issue 3: Inadequate Enquiry by Assessing Officer

Upon examination, it was found that the Assessing Officer passed a cryptic order without conducting thorough enquiries or verifications regarding the significant increase in long-term borrowing and loans and advances by the assessee company. The Principal Commissioner noted discrepancies in the financial statements and balance sheets of the group companies from which the loans were obtained. The Assessing Officer failed to make necessary enquiries, especially regarding the identity, creditworthiness, and genuineness of the loan transactions as required under section 68 of the Act.

Conclusion:
The Appellate Tribunal upheld the revisionary action taken by the Principal Commissioner under section 263 of the Act, as the assessment order was deemed to be erroneous and prejudicial to the interest of Revenue due to the lack of proper verification and enquiries by the Assessing Officer. The Tribunal dismissed the appeal of the assessee, affirming the decision to direct a fresh assessment order with thorough verification and examination of the loan transactions.