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TMI Blog2016 (3) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... er VI of the Act which deals with ‘Aggregation of income and set off or carry forward of loss’ and Section 68 of the Act cast primary onus on the assessee to explain nature and source of cash credit as appearing in the books of the assessee to the satisfaction of the AO and failure to explain the cash credit to the satisfaction of the AO shall lead to computation of income from undisclosed sources under the head ‘Income from other sources’. Thus, in our considered view based on the facts as emanating from the records, the A.O. has not made any enquiry or verification before accepting the gift of ₹ 1.48 crores received by the assessee from his maternal uncle, Mr Chimanlal Mehta and has merely accepted the submissions of the assessee with respect to receipt of said gift and the Pr. CIT has rightly invoked the provisions of section 263 of the Act directing the A.O. to make proper enquiry and reframe the assessment. The case laws relied upon by the assessee are not applicable in this case as in the instant appeal, the AO has not made any inquiries or verification which should have been made to satisfy the ingredients of Section 68 of the Act and has merely accepted the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted affidavit dated 30-12- 2010 executed by his uncle Mr. Kumar Chimanlal Mehta .Similarly , the assessee explained the sources of investment in the flat no 1101, 11th Floor, Raheja Excelor, 63, Tardeo Road, Mumbai-400034. The AO accepted the returned income and made no addition to the income of the assessee in the assessment order u/s 143(3) dated 08-03-2013 passed by the AO and accordingly total income was computed at ₹ 36,73,810/- vide assessment order u/s 143(3) of the Act dated 8-3-2013 which was also the returned income filed with the Revenue by the assessee. 4.The Pr. CIT issued the notice dated 14.01.2015 w.r.t. revision of income u/s 263 of the Act for the assessment year 2010-11. Thereafter, The assessee was show caused by the Pr. CIT vide three show cause notices u/s 263 of the Act dated 12-02-2015, 26-02-2015 and 17-03-2015 with respect to the receipt of the gift of ₹ 1,48,00,000/- from assessee s maternal uncle Shri Kumar Chimanlal Mehta by the assessee during the previous year on 08th May 2009. The Pr. CIT observed that the claim of the assessee during the assessment proceedings was that the donor is a NRE and gifted the amount out of his foreign i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores and directed the A.O. vide orders u/s 263 of the Act dated 25-03-2015 to examine all the aspects of the gift as claimed by the assesee and reframe the assessment after giving sufficient opportunity to the assessee of being heard. 5. Aggrieved by the orders dated 25-03-2015 passed by the Pr. CIT u/s 263 of the Act, the assessee is in further appeal before the Tribunal. 6. The ld. Counsel for the assessee submitted that the case was selected for scrutiny under CASS and assessment has been framed u/s 143(3) of the Act vide orders dated 8.3.2013. The ld. Counsel of the assessee submitted that the assessee has received a gift of ₹ 1,48,00,000/- from his maternal uncle Shri Kumar Chimianlal Mehta which fall under definition of relative under section 56(2)(vii) of the Act and the amount is exempt from tax under the Act. The ld. Counsel of the assessee submitted that the Pr. CIT has not arrived at any conclusion rather he is directing the A.O. to enquire and find out the creditworthiness, capacity and genuineness about the donor and has wrongly concluded that the assessment order of the AO is erroneous and prejudicial to the interest of the revenue. Three show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r used for giving gift to the assessee. The ld. Counsel submitted that the audit query raised by the audit team regarding this gift of ₹ 1.48 crores was the basis , upon which the query was raised by the AO which was duly replied by the assessee vide three letters dated 17-10- 2013, 13-01-2014 and 19-03-2014 filed before the AO which are also placed at paper book page No. 20 to 41, whereby all the details were duly submitted proving relation between the assessee and the donor, which are PAN card of the donor, passport of the donor, PAN card of the assessee s mother (as donor is the brother of assessee s mother), passport of the assessee s mother, PAN card of the assessee, passport of the assessee. She submitted that the copy of ING Vysya Bank NRE account along with copy of advise of Mashreq Bank of Dubai and CA certificate of Shri Kumar Chimanlal Mehta and notorised affidavit of the donor were also submitted before the AO to establish the identity and creditworthiness of the donor and the genuineness of the gift transaction of ₹ 1,48,00,000/- . The ld. Counsel of the assessee submitted that the first notice issued by Pr. CIT which is almost after one year the audit quer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused the material available on record including the case laws relied upon. We have observed that the case of the assessee was selected for scrutiny under CASS and assessment has been framed u/s 143(3) of the Act vide assessment orders dated 8.3.2013. As per AIR information, the assessee had, inter alia, made investment in mutual funds to the tune of ₹ 1.57 crores in May 2009 which is stated to be made out of gift of ₹ 1.48 crores received by the assessee from his maternal uncle Shri Kumar Chimanlal Mehta vide Cheque No. 221429 dated 8th May, 2009. We have observed that the assessee has filed an affidavit dated 30-12-2010 during course of assessment proceedings executed by his maternal uncle Shri Kumar Chimanlal Mehta, the donor whereby he stated that he has made the gift to his nephew i.e. the assessee of ₹ 1.48 crores on 08-05-2009 , out of natural love and affection. As per facts emerging from records, the A.O. has accepted the gift of ₹ 1,48,00,000/- received by the assessee on 08-05-2009 from his maternal uncle , Mr. Kumar Chimanlal Mehta without making any further enquiry or verification regarding the identity and creditworthiness of the donor the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 25-03-2015 directing the A.O. to verify all the aspects of the gift of ₹ 1,48,00,000/- received on 08-05-2009 by the assessee from his maternal uncle, Mr. Kumar Chimanlal Mehta as the same were not verified by the AO while passing assessment orders u/s 143(3) of the Act . 9. We have observed that w.e.f. Ist June, 2015 by Finance Bill 2015, Explanation 2 to section 263 was inserted to declare the law which reads as under:- [Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue it is proposed to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which, should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment will take effect from 1st day of June, 2015. Notes on Clauses Finance Bill 2015 Clause 65 of the Bill seeks to amend section 263 of the Income-tax Act relating to revision of orders prejudicial to revenue. The existing provisions contained in sub-section (1) of section 263 provide that if the Principal Commissioner or Commissioner considers that any order passed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of the creditor and the genuineness of the transaction as appearing in the books of account as per mandate of section 68 of the Act which is a primary onus caste by law on the assessee. 11. In this instant appeal , during the course of the assessment proceedings, the assessee has submitted an affidavit dated 30-12-2010 of the donor to establish the identity and creditworthiness of the donor and to prove the genuineness of the gift and the A.O. merely accepted the same without making any further enquiry or verification. In our considered opinion, the facts of the case of the assessee is similar to the facts in the case of Malabar Industrial Co. Limited(supra) whereby no enquiry/verification is made by the AO while submissions of the assessee were simply accepted. Moreover, now Explanation 2 to Section 263 of the Act is inserted in the statute which is declaratory in nature to provide clarity on the issue whereby if the A.O. failed to make any enquiry or necessary verification which should have been made, the order becomes erroneous and prejudicial to the interest of revenue. A proviso added from 01-04-1988 to Section 43B of the Act from 01-04-1984 came up for considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is placed under Chapter VI of the Act which deals with Aggregation of income and set off or carry forward of loss and Section 68 of the Act cast primary onus on the assessee to explain nature and source of cash credit as appearing in the books of the assessee to the satisfaction of the AO and failure to explain the cash credit to the satisfaction of the AO shall lead to computation of income from undisclosed sources under the head Income from other sources . Thus, in our considered view based on the facts as emanating from the records, the A.O. has not made any enquiry or verification before accepting the gift of ₹ 1.48 crores received by the assessee from his maternal uncle, Mr Chimanlal Mehta and has merely accepted the submissions of the assessee with respect to receipt of said gift and the Pr. CIT has rightly invoked the provisions of section 263 of the Act directing the A.O. to make proper enquiry and reframe the assessment. The case laws relied upon by the assessee are not applicable in this case as in the instant appeal, the AO has not made any inquiries or verification which should have been made to satisfy the ingredients of Section 68 of the Act and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - received by the assessee from his uncle Mr. Kumar Chimanlal Mehta and the AO merely accepted the submissions of the assessee. c) DIT v. Jyoti Foundation (2013) 357 ITR 388(Delhi)- It was held by Hon ble Delhi High Court that orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but the orders which are passed after inquiry/investigation are treated on question /issue are not per-se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In case where there is inadequate enquiry but not lack of enquiry , the CIT must record a finding that the order/inquiry made is erroneous. While in the instant case, the AO has merely accepted the submissions made by the assessee with respect to gift of ₹ 1,48,00,000/- received by the assessee from his uncle Mr. Kumar Chimanlal Mehta and no enquiry or verification was conducted by the AO. d) CIT v. Gabriel India Limited (1993) 203 ITR 108(Bom.)- It was held by Hon ble Bombay High Court th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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