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TMI Blog2016 (10) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... lfilled and in the absence of the same in the present case, the powers vested under Section 263 cannot be exercised. 3. On the facts and circumstances of the case, the order passed by the learned CIT under Section 263 of the Income tax Act without there being any finding about the order passed by the AO being erroneous as well as prejudicial to the interest of the Revenue is bad in law and liable to be quashed. 4. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in setting aside the order for the purpose of reverification without giving any finding haw the order is erroneous. 5. On the facts and circumstances of the case, the learned CIT has erred, bath an facts and in law, in _ indulging in surmises and conjunction while invoking his revisionary power under Section 263 without bringing any material .or evidences about any error in the order passed by the AO. 6. On the facts and circumstances of the case, the learned CIT has erred, bath an facts and in law, in exercising his jurisdiction mainly on the allegation of inadequate enquiry ignoring the fact that power under Section 263 can be invoked only when there is lack of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same were submitted to the AO during the course of assessment proceedings. 4. However, the Ld. CIT disregarded the submissions of the assessee and issued notice u/s. 263(1) of the Act on 9.12.2013, requiring the assessee to show cause as to why the assessment may not be cancelled. In reply to the said notice, assessee submitted its reply dated 14.2.2014, wherein it was stated that the details regarding the unsecured loans received during the year were duly submitted to the AO in the original assessment proceedings u/s. 143(1) of the Act. However, the Ld. CIT ignored the explanation offered by the assessee and set aside the assessment order and directed the AO to make fresh assessment vide his order dated 24.2.2014 passed u/s. 263 of the I.T. Act, 1961. 5. Against the aforesaid order of the Ld. CIT passed u/s. 263 of the Act dated 24.2.2014, assessee is in appeal before the Tribunal. 6. Ld. Counsel of the assessee has stated that complete details regarding the unsecured loans were submitted by the assessee during the assessment proceedings. The details regarding the unsecured loans alongwith the source of the same were asked by the AO vide its questionnaire dated 28.10.2010. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that Ld. CIT in 263 proceedings cannot substitute his view upon the view of AO. Section 68 is about the satisfaction of AO. The AO being satisfied with the explanation given by the assessee, Ld. CIT cannot substitute his view. He further stated that it is a case where creditors have duly reflected the transactions in their ITRs and has confirmed the amount advanced to the assessee. No adverse inference can be drawn against the assessee on the ground that assessee has failed to prove source of source. Assessee cannot be asked to prove source of source. To support this contention, he relied upon the Hon'ble Jurisdictional High Court in the case of CIT vs. Shiv Dhooti Pearls & Investments (ITA No. 429/2003 dated 21.12.2015). Ld. Counsel of the assessee has stated that in view of the above, judgments, and keeping in mind the facts of the case, the action of the Ld. CIT in directing the AO for a fresh assessment is bad in law and thus, the order of the Ld. CIT deserves to be quashed. 7. On the other hand, Ld. CIT(DR) controverted the various submissions and arguments advanced by the Ld. AR of the Assessee. He has strongly relied upon the impugned Order passed u/s. 263 by the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Smt. Sunita Jain was depositing heavy cash on different dates in her bank account. The source of this amount has been explained by the assessee that Smt. Sunita Jain (wife of assessee) has received Rs. 34 lacs from sale consideration of land and remaining from the amount accumulated with her out of income income/capital receipts/loan raised in the past year. 2.1 From the assessment record, it is noticed that Smt. Sunita Jain, wife of the assesses, has claimed that she has said land for consideration of Rs. 34 Lacs to Smt Raj Rani W/o Sh. Surjeet Kumar during the year. In support of the claim, asessee furnished a zerox copy of affidavit claiming an agreement (Iqrarnama) which is neither registered with any authority nor notarized or attested by Oath Commissioner. The said agreement claimed has been executed on 01.12.2008 and as per that Smt. Sunita Jain received cash of Rs. 10 lacs on 27.11.2008 and Rs. 24 lacs on 1.12.2008. But Rs. 24 lacs on 1.12.2008. But perusal of the assessment records reveals that Smt. Sunita Jain instead of selling the said land to Smt. Raj Rani executed GPA in her favour on 18.11.2009 i.e. after about one year of so agreement. In other words, Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, as held in by the Hon'ble Supreme Court in the landmark case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC). The word erroneous in section 263 of the Act includes failure to make such enquiry as warranted by the facts of the case, as held in the case of Gee Vee Enterprises vs. ADDL. CIT (1975) 99 ITR 375 (Delhi). Further, failure to make enquiries making the order without evidence or enquiry renders the order erroneous and prejudicial held in the case of Addl. CIT vs. Mukur Corporn. (1978) 111 ITR 312 (Guj) and Ram Pyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC). In this regard, the following observations of the Andhra Pradesh High Court in CWT Vs. NT Rama Rao [2003] 261 ITR 611 made after applying the 'decisions of the Supreme Court in Malabar Industrial Company Ltd. Vs. CIT 243 TTR 83, are relevant: What is an error? "A mistaken judgement or incorrect belief as to the or effect of matter of fact, or a false or mistaken conception or application of the law to the facts of a cause as will furnish ground for a review of the proceedings upon a writ. A mistake of law, or false or irregular application of it, such as vitiates the proceedings and warrants the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by various judicial pronouncements including recent judgement of Hon'ble Punjab & Haryana High Court dated 23.11.2010 in the case of M/s Saraswiiti Tractors Corporation, Kaithal Vs. Commissioner of income Tax, Karnal in IT.A No. 68 of 2014, the genuineness of source of cash deposits in the creditors account has to be established before the assessing authority and mere furnishing of confirmation letters and copy of ITR of the creditors are not sufficient to prove the credit worthiness of the creditors. So long as the definite source of advances to assessee is not disclosed during the assessment, the enquiries regarding the cash credits cannot be treated as complete. 6. Coming back to the facts of the case of the assesses it is apparent from assessment record that the assessment order u/s 143(3} has been passed by the AO without application of mind in respect of point raised in the preceding paragraphs. Therefore, taking into consideration all the facts and circumstances of the case, it can be inferred that the AO has failed to scrutinize the case properly and as such failure of the AO, to carry out the desired enquiries during the assessment proceedings, has rendered the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT to the facts of the case before issuing the show cause notice u/s 263 of the Act. The audit objection raised cannot be a basis of revision of assessment orders. Therefore, the revision proceedings as initiated by the Ld. CIT are invalid, bad in law and liable to be quashed. To support our view, we rely upon the judgment of Hon'ble Jurisdictional High Court of Punjab and Haryana in the case of CIT v. Sohana Woollen Mills [2008] 296 ITR 238, wherein the Hon'ble High Court has held as under: "Mere audit objection and merely because a different view could be taken, are not enough to say that the order of the Assessing Officer was erroneous or prejudicial to the interest of the revenue. The jurisdiction could be exercised if the Commissioner audit is satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the Commissioner for exercising jurisdiction is called for or not, has to be decided having regard to a given fact situation." 10.1 Further on the similar facts and circumstances of the case, the following judgment was passed by the ITAT, Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, exercise of jurisdiction under section 263 is not sustainable. In most cases of alleged 'inadequate investigation', it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without Commissioner conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. Commissioner cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the Commissioner hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore, the Commissioner must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the Commissioner must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the Commissioner can rely includes not only the record as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce. In the present case assessee has established the source. What CIT is trying to do in 263 proceedings, is to ask assessee to establish source of source, which is not required under section 68. Moreover the issue which is arising is at best against the creditors and not against the assessee. The creditors having accepted and confirmed the deposit, having filed the return of income declaring capital gain in the year under consideration and being assessed under the same ward and has been accepted, no adverse view can be taken against the assessee. 10.5 Further CIT in 263 proceedings cannot substitute his view upon the view of AO. Section 68 is about the satisfaction of AO. The AO being satisfied with the explanation given by the assessee, CIT cannot substitute his view. 10.6 It is a case where creditors have duly reflected the transactions in their ITRs and has confirmed the amount advanced to the assessee. No adverse inference can be drawn against the assessee on the ground that assessee has failed to prove source of source. Assessee can't be asked to prove source of source. Our aforesaid view is fully supported by the following Jurisdictional High Court decision in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then! the interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the gemfineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and subcreditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala fide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A. O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or subc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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