9911796707
TMI Blog1991 (4) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was completed. 3. The learned Commissioner of Income-tax acting under section 263 of the I.T. Act, 1961, issued notice to the assessee bringing her attention to the fact that the ITO had overlooked the provisions, of section 69D of the I.T. Act and as such his order dated 31-3-1987 was erroneous in so far as it was prejudicial to the interests of the revenue and required suitable revision. The assessee filed her objections by her letter dated 13-10-1988 and explained that she was under the bona fide belief that any borrowal of money from money-lenders constituted a hundi transaction and as such she gave the information to the auditors that the borrowings were on hundi and thus the auditor has made his remark referred to by the Commissioner of Incometax in the impugned notice. Further it was contended that the borrowings were cash transactions without any documents like hundi or pronote and wanted an opportunity of being heard. An opportunity was given to the assessee and it was pleaded before the Commissioner of Income-tax that the description of the transaction amounting to Rs. 12 lakhs by the auditor in his report given under section 44AB of the I.T. Act was incorre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es comprehension as to how he could have overlooked the auditor's remarks about the hundi loans. Rather he was convinced that the loans amounting to Rs. 12 lakhs were not hundi loans and that is why he called upon the assessee to produce the confirmatory letters etc. Unfortunately for the assessee the learned ITO has not specifically stated that these are not hundi loans. However, his conduct will show that he looked upon them as non-hundi loans. Therefore, there was no error resulting in prejudice to the revenue. When these points were brought to the notice of the learned Commissioner of Income-tax in the course of the hearing under section 263 proceedings, the learned Commissioner took the mistaken view that the assessee had changed her stand and, therefore, it was but necessary to enquire into the genuineness of the transactions. Shri Nair further submitted that it was not the assessee who had changed her stand but it was the learned CIT who had shifted his ground as will be evident from the fact that whereas the original notice was for treating the transaction as hundi loan, the final order under section 263 was for finding out the genuineness of the transaction. If the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions have been made. He relied on the following decisions :-- (i) Tribunal decision in M.B.S. Purushotham v. ITO [1988] 26 ITD 520 (Hyd.) (ii) The report of the Supreme Court as found in 187 ITR (Statutes) 37 in CIT v. P.S.T.S. Thiraviarathm Nadar (iii) Kerala Law Journal Tax Case 1991 para 21 and (iv) B.C.S. Kartar Chit Fund Finance Co. (P.) Ltd. v. CIT [1989] 179 ITR 317/46 Taxman 88 (Punj. Har.) He further submitted that the CIT was only instituting a roving inquiry in the hope that something would turn up and such a course is not permissible to him in a proceeding under section 263 unless it has been established that the initial order of the ITO suffered from an error resulting in prejudice. 7. We thus heard rival submissions and perused the records. Form No. 3CD prescribed under rule 6G(2)(a) of the I.T. Rules contains a statement of particulars in the case of person carrying on business and the said statement has to be furnished by the tax auditor under section 44AB of the I.T. Act. The question as against Column 8 of the statement cited supra the answers thereto are as follows :-- " Whether any amount is borrowed on a Amount borrowed on hundi hundi form, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Hotel President Rs. 2,560 -------------------- Rs. 4,879 -------------------- Therefore, it can be said that the ITO was very much aware of the statement of particulars furnished by the tax auditor in Form No. 3CD including the information that is provided by him about the borrowals having been made on hundi to the extent of Rs. 12 Lakhs. We went through the assessment file and the auditor has furnished the details among others for the sum of Rs. 12,00,000 in a separate statement in response to Serial item 10 of Form No. 3CD which require the auditor to state the following information : 10. Particulars of each loan or deposit of Rs. 10,000 or more taken or accepted by the assessee in the following form : (i) Name and address of the lender/depositor (ii) Whether amount borrowed on hundi ? (iii) Whether loan/deposit account was squared up during the year ? (iv) Maximum amount outstanding at any time during the year (v) Whether loan/deposit was taken or accepted in cash ? (vi) Has any loan or deposit of Rs. 10,000 or more been repaid in cash ? " It would appear that there are 37 entries in that statement and as against 34 entries it is remarked by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndi transactions, the CIT was justified in invoking his jurisdiction under section 263. Assuming, without admitting, that the CIT was justified in invoking the jurisdiction under section 263, we hold that on merits the revenue has no case for it. He show-cause notice refers to the amount of Rs. 12 lakhs borrowed on hundi otherwise than through account payee cheques and the applicability of section 69D of the I.T. Act which was allegedly overlooked by the ITO as a result of which the order of the ITO was erroneous and prejudicial to the interests of revenue requiring revision. In response to this notice the assessee had replied in detail explaining the true nature of the transaction supported by statements from all the creditors, a sample of which is given below : " TO WHOM IT MAY CONCERN : I had given a sum of Rs. 35,000 (Rupees Thirty Five Thousand only) as loan to Smt. Indira Rani, Sreenilayam, Veerabhadra Gardens, Pottakuzhi, Pattom, Trivandrum, in cash during the financial year 1984-85. Neither hundi nor pronote or any other document has been executed in this connection. I gave the money in cash as loan. I declare that what is stated above is true and correct. Sd/- Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loans before they are accepted as genuine. We have gone through the CIT's file which contains the issue of notice and the record of hearings etc. and contains in it a noting to the following effect made on 9-12-1988 before passing of the order under section 263 of the I.T. Act on 9-3-1989 : "No response so far. This will be posted sometime later. In the meantime some enquiry to be caused about the genuineness of the creditor at Madras. A.D.I. will please do the necessary. . . " This noting is only symptomatic of the suspicion of the learned CIT that all is not well with the assessment Suspicions however great cannot take the place of proof nor can it be a cause of action under section 263. No material in regard to the type of enquiry conducted and the kind of information collected pursuant to this noting is available on record. For these reasons we vacate the order of the CIT. 9. On both sides several case laws, as noted in the preceding paragraphs, were cited before us. As the decision is based on the facts of the case and the preponderance of probabilities thereon we do not propose to go into those cases. 10. In the result, the appeal is allowed - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
