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TMI Blog2017 (8) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed u/s 263 of the Act by the ld. CIT and grounds raised by the assessee are allowed. - ITA No. 1730/Del/2013 - - - Dated:- 13-4-2017 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MISS S. KAMBLE JUDICIAL MEMBER For The Assessee : Dr. Rakesh Gupta, Adv. Shri Somil Agarwal, Adv For The Revenue : Shri A.K. Saroha, CIT- DR ORDER PER R.K. PANDA, ACCOUNTANT MEMBER:- This appeal filed by the assessee is directed against the order dated 01.02.2013 passed u/s 263 of the Income-tax Act, 1961 by the CIT, Dehradun relating A.Y. 2009-10. 2. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 29.09.2009 declaring total income of ₹ 4,87,390/-. The A.O completed the assessment u/s 143(3) of the Act on 05.05.2011 determining the total income at ₹ 6,85,217/-. Subsequently the ld. CIT received proposal dated 12.09.2012 from the JCIT, Hardwar Range, Hardwar proposing action u/s 263 of the Act on the ground that although this case was selected for scrutiny on the ground that the A.O should examine the genuineness of sundry creditors, yet the A.O while passing the assessment order did not verify all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2009 respectively. Hence these are squared up entries as no balance remained outstanding at the end of the year. 5. However, the ld. CIT was not fully satisfied with the explanation given by the assessee. He accepted the contention of the assessee regarding the balance of M/s Kundan Tent House, since there is no discussion about this issue. He however held that the reply given by the assessee regarding sundry creditors is not acceptable. He observed that all the creditors are not old creditors. From the list of the old creditors provided by the assessee and information collected by the A.O, he observed that the following creditors have not been verified: 1. M/s jai Ambey Enterprises, Faridabad 2. M/s Monarch Enterprises, Faridabad 3. M/s Sumit Enterprises, Faridabad 4. M/s Shri Ganpati Enterprises, Faridabad 5 M/s Shiv Shakti Traders, Ghaziabad 6. M/s S.K. Trading Co. Ludhiana 7. M/s Varun Trade Centre, New Delhi 6. He observed that out of total of 22 creditors, the A.O should have atleast verified the above mentioned new creditors. He further observed that even where the information was called for by the A.O, proper verification has not been done. He ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from Joint Commissioner of Income Tax, Hardwar Range, Hardwar. 6. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other. 8. The ld. AR strongly objected to the order passed by the ld. CIT u/s 263 of the Act. He submitted that the ld. CIT had invoked jurisdiction u/s 263 of the Act on two grounds, namely, a) non verification of sundry creditors by the A.O b) there is difference of balance in the account of M/s Balaji Enterprises. He submitted that the A.O had conducted thorough enquiry during the course of assessment proceedings. Referring to page 24 and 25 of the paper book, the ld. AR drew the attention of the Bench to the details of sundry creditors totaling to ₹ 4,77,66,341.12. He submitted that the A.O had picked up higher figure and issued notice u/s 133(6)/131 of the Act on test check basis. Referring to the said list which contained names of 22 parties, the ld. AR submitted that the A.O has issued summons/notices to party at Sl. No. 11,12,17,19,20 and 21, total amount of which comes to ₹ 3.09 crores wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. He submitted that when the identity, capacity and genuineness of the creditors are given, there may not be disallowance u/s 40A(3) of the Act. For the above proposition, he referred to the decision of the Kolkata Bench of the Tribunal in the case of Nirmal Kumar Das Vs. ACIT vide ITA No. 391/KOL/2014 order dated 11.12.2015 wherein the Tribunal has held that the purpose of section 40A(3) of the Act is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. Relying on various decisions, the Tribunal deleted the addition made by the A.O and sustained by the ld. CIT(A) u/s 40A(3) of the Act. He further submitted that in notice under section 263 of the Act, the ld. CIT has not raised the issue of cash payments exceeding ₹ 20,000/- so as to show violation of section 40A(3) of the Act. Referring to the ratio of the decision of the Hon'ble Delhi High Court in the case of Ashish Rajpal reported in 320 ITR 674, he submitted that the Hon'ble High Court in the said decision has held that under the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the ld. CIT be cancelled and the grounds raised by the assessee be allowed. 13. The ld. DR, on the other hand, heavily relied on the order of the CIT. He submitted that the order passed by the A.O clearly demonstrates that there is no application of mind. Referring to the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd Vs. CIT [2000] 243 ITR 83, he submitted that when there is no application of mind, then the assessment order can be termed as erroneous and prejudicial to the interest of the revenue. He submitted that in the instant case, there is absolutely no enquiry. In the name of enquiry, there is just farce or mere pretence of enquiry. When the case was selected for scrutiny on the ground that A.O should examine genuineness of sundry creditors , issuing notice u/s 133(6) only in 6 cases against 22 such cases shows no application of mind. The fact of accepting sundry creditors without any further enquiry inspite of showing pattern of cash payments below ₹ 20,000/- on consecutive days, which is unnatural, shows that the A.O has not conducted the enquiry in a manner whereby enough material is placed on record to reach the satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .05.2016, has held that decision in the case of Crompton Greaves Ltd [supra] is per incuriam and Explanation 2 to Section 263 is having prospective operation. He submitted that when two views are possible, the view which is in favour of the assessee should be considered. Therefore, the argument of the ld. DR that insertion of Explanation 2 to Section 263 of the Act is restrospective cannot be accepted. He further submitted that the ld. CIT ought to have seen the record. However, he has not examined the record. So far as the various decisions relied upon by the ld. DR are concerned, he submitted that those decisions are not applicable to the facts of the present case and are distinguishable. Since the A.O has made enquiry to his satisfaction and the assessee has furnished relevant details, therefore, the ld. CIT has no power to invoke power u/s 263 of the Act. 15. We have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT and the paper book filed on behalf of the assessee. We have also considered the various decisions relied upon by both the sides. We find the A.O, in the instant case has passed an order u/s 143(3) dated 05.05.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and prejudicial to the interest of the Revenue. According to him, there is difference between inadequate enquiry and no enquiry. It is also his submission that when notice issued u/s 263 of the Act does not refer to provisions of section 40A(3) of the Act, the ld. CIT in the order passed u/s 263 of the Act cannot cancel the assessment on the issue of such violation. 19. We find merit in the above arguments of the ld. AR. We find the A.O vide notice u/s 142(1) dated 07.09.2010 has asked various details including names and address of all sundry creditors and debtors appearing in the balance sheet. We find the assessee has replied to such notices by furnishing various details including the details of sundry creditors and the advances, details of which are appearing in the paper books pages 22 to 28B. Similarly, we find from book pages 131 to 163 of the paper book that the A.O had issued notice u/s 133(6) of the Act to different parties and those parties have given their replies to the A.O directly by giving various details as called for. Under these circumstances, it is to be seen as to whether the order passed u/s 143(3) of the Act by the A.O is erroneous and prejudicial to the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. 21. We find the Hon'ble Delhi High Court in the case of CIT Vs. Leisure Wear Export [supra] has held as under: The power of revision is not meant to be exercised for the purpose of 9 directing the Assessing Officer to hold another investigation without describing as to how the order of the Assessing Officer is erroneous. From this it also follows that where the assessment order has been passed by the Assessing Officer after taking into account the assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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