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TMI Blog2016 (4) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... alent in the concerned trade, we are of the view that even in respect of these advances received against future supplies, proper enquiries ought to have been made by the AO before completing the Assessment because there were several suspicious circumstances which warranted a probe by the AO. Admittedly no such probe has been made by the AO. The reasons given for upholding exercise of jurisdiction u/s.263 of the Act, in respect of unsecured loans received during the previous year would equally apply to these advances also. Thus we uphold the order u/s.263 of the Act - Decided against assessee - ITA No.781/Kol/2013 - - - Dated:- 2-3-2016 - Shri N.V.Vasudevan, JM Shri M.Balaganesh, AM For The Appellant: Shri M.Satnaliwala, FCA F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unsecured creditors. The capacity and genuineness of the transactions was not established. On this ground order of the AO, according to the CIT was erroneous and prejudicial to the interest of the revenue. 5. CIT also noticed that the assessee received huge advances from the customers. CIT found that the assessee made single sales to M/s. Gel Marketing Ltd. The assessee also gave huge advances to M/s. Gel Marketing Ltd., and other partiers from time to time. CIT was of the view that these transactions were unusual and the AO failed to make inquiries on the above transactions. 6. In response to the show cause notice u/s.263 of the Act given to the Assessee on the line of reasoning given above, the assessee filed his reply pointing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that it is very usual practice in this trade. I have perused these accounts. The assessee has obtained unsecured loans in the garb of customers' advances against sales and has squared up those other than by sales later on. The onus is heavier as no interest has been paid in these cases. For example loan of ₹ 5,00,000/- from M/S Gel Marketing Ltd has been repaid otherwise than by an account payee cheque or draft orders erroneous and prejudicial to the interest of revenue. The assessing officer is directed to make necessary enquiries and draw conclusions therefrom. 5. It is a settled position of law that the failure to make enquiries which are called for, on the facts of the case would itself make the assessment errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer to further such an enquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. In view of facts and legal position stated above, it is hereby held that assessment order u/s. 143(3) of IT Act dt. 31.12.10 passed in this case for A.Yr. 2008-09 is erroneous in so far as it is prejudicial to the interest of revenue. Consequently, in exercise of the power conferred by Sec. 263 of the Act, the said assessment order dated 31.12.2010 is set aside, but only to the extent indicated in foregoing paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. In some cases, collection of necessary material by the AO may lead to an inference that he conducted enquiry. In some other cases, mere placing the documents on record cannot be equalized with conducting an enquiry. Where the facts of a particular transaction cry hoarse about their ingenuity and even a casual look at such facts, prima facie, divulges foul play, a mere placing of papers on record cannot at all be considered as conducting an inadequate enquiry. Such latter cases fall within the category of no enquiry at all because of the inaction of the AO to read a writing on the wall. 11. At this juncture, we would like to deal with the judgment of the Hon ble jurisdictional High Court in the case of CIT Vs. Maithen International 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on to hold that a mere examination of the bank passbook, profit loss account and balance sheet is not enough. When the requisite enquiry was not made, the Hon ble High Court held that the order was to be considered as erroneous and prejudicial to the interests of the Revenue. It set aside the view of the Tribunal on inadequate enquiry by holding that: If the relevant enquiry was not made, it may in appropriate cases amount to no enquiry and may also be a case of non-application of mind. It further observed that the question of inadequate enquiry should be understood in its proper perspective and: if it can be shown that the inadequate enquiry led the AO or may have led into assumption of incorrect facts, that could make the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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