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TMI Blog2019 (11) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... e no hesitation in observing that on this ground of non-enquiry, the order u/s 263 holding the assessment order to be erroneous and prejudicial to the interests of the Revenue per-se erroneous. Transactions involving receipt of loan from M/s Anadya Technologies Pvt Ltd M/s Hotahoti Wood Products Ltd during the year the information gathered by the AO through the enquiries conducted u/s 133(6) of the Act from the loan creditors, sufficiently established the creditworthiness of the loan creditor and the genuineness of the transactions and therefore the allegation on which the ld. Pr. CIT proceeded to issue the show cause notice u/s 263 is found to be untenable on facts and in law. From the order of the Ld. Pr. CIT, we note that he found fault with the AO s role of an investigator because in his subjective opinion the AO did not properly investigate into the facts of the case. Keeping the foregoing fault in mind and taking into account the facts as discussed in earlier paragraphs, we note that in the given facts of the present case the AO had made specific enquiry into the loan transactions of the assessee with its loan creditors based on the CASS parameter. In response to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT was without jurisdiction and all subsequent actions are 'null' in the eyes of law. We therefore quash the order impugned before us. Appeal of assessee allowed. - I.TA No. 1103/Kol/2019 - - - Dated:- 31-10-2019 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For the Appellant : Shri D.S. Damle, FCA, ld.AR For the Respondent : Dr. (Shri) P.K. Srihari, CIT, ld. Sr.DR ORDER PER SHRI A.T. VARKEY, JM This appeal is preferred by the assessee against the order of Ld. Pr. CIT-9, Kolkata dated 28-03-2019 for the assessment year 2014-15 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter in short the Act ). 2. The main grievance of the assessee is against the action of the ld. PCIT in assuming his jurisdiction u/s. 263 of the Act without satisfying the condition precedent prescribed by the statute. 3. The brief facts of the case are that the assessee has filed its R.O.I (Return of Income) for the A.Y under consideration on 29-09-2014 declaring total income of ₹ 8,75,470/-. Thereafter, the case was selected for scrutiny un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. Thus, the reasons for selection remained unverified to that extent. 5. Information gathered through issuance of notice u/s.133(6) reveal that all the above entities have shown very low and even 'Nil' income for the year and claimed huge TDS refunds. Copy of their annual accounts reflect huge unsecured loans that are invested in a battery of apparently shell companies. The onus lies on the assessee to establish the credit worthiness of the loan creditors which is not discharged through mere filing of all primary evidence. The Assessing Officer in his turn had failed to take note of the dings on record and thereby did not cause any field enquiry regarding the genuineness and credit-worthiness of the loan creditors through field enquiry and even summon them to furnish their explanation as to how they had provided such high loans. 6. In this regard, reference may be made to the Hon'ble Supreme Court's decision in the case of CIT vs. N. Tarika Properties Investment (2014) reported in 51 taxmann 387 (SC) where it has been held that - ' PAN cannot be treated as sufficient disclosure of identity of the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR, the AO has carried out both the roles given by the statute. According to him, as an investigating authority he has called upon the assessee to file the details of loan creditors. Pursuant to which, the assessee had filed full details before the AO, who after satisfying with the same has not drawn any adverse inference against the assessee on this count. Elaborating this fact the ld. AR drew our attention to pages- 11 12 of the Paper book, wherein the AO had issued 133(6) notices to M/s.Anadya Technologies Pvt Ltd and M/s. Hotahoti Wood Products Ltd, wherein following query(ies) was raised against both the loan creditors: Record that you have given loan UNSECURED LOAN to Smt of CITYSTAR GANGULY PROJECTS LTD 92/1B Mualana Abul Kalam Azad Sarani, Kolkata-54, PAN AADCA7382F so that you are directed to request to provide relevant documents viz. highlighting the Bank Transaction Statement, B/Sheet as at 31.03.2014 highlighting the Asset vide specific transaction with name and amount including a submission duly fill up with following format accordingly within three days from the receipt of this letter providing the copy of the undersigned. Notice u/s 133(6) with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g assumption that the two bodies corporate from whom the assessee had obtained loans had filed low and/or NIL return of income and claimed huge TDS refunds and had accepted huge unsecured loans and invested in battery of shell companies. Inviting our attention to Page 13 of the paper-book containing the reply furnished by M/s Anadya Technologies Pvt Ltd, which had advanced loan of ₹ 1,00,00,000/- to the assessee during the year, the ld. AR pointed out that this loan creditor had its own capital reserves in excess of ₹ 205.67 lacs. He thereafter took us through its audited financial statements, available at Pages 21 to 32 of paper book, to show that M/s Anadya Technologies Pvt Ltd had carried on substantial business activities during the year which generated revenue of ₹ 709.56 lacs and it had reported net profit of ₹ 53,77,880/-. The AR also pointed out that during the relevant year M/s Anadya Technologies Pvt Ltd had disclosed interest income of ₹ 31,60,575/- whereas interest of ₹ 8,35,890/- only was received from the assessee. Referring to copy of 26AS statement which is placed at Pages 33 to 34 of the paper-book, he pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to decide whether the order is erroneous. Instead it is the duty of the ld. Pr. CIT to conduct enquiry and verification and show himself that the assessment order suffered from error or mistake making it unsustainable in law. The ld. AR pointed out that after the assessee had furnished evidences to disprove the allegations levelled in the SCN, no enquiry or verification was conducted by the ld. Pr. CIT himself into the documents and evidences furnished before him, but he had simply set aside the issue back to the AO for passing the assessment order afresh. He thus submitted that the impugned order passed by the ld. Pr. CIT was bad in law and urged that it ought to be quashed. 7. Per contra the ld. DR supported the observation made by the ld. Pr.CIT, and he submitted that since no summons were issued by the AO in respect of loan creditors the ld. PCIT in his wisdom held that without issuing summons against the loan creditors how the AO could verify veracity of the loan creditors. According to him since the assessment records did not have the documents of other two creditors he wondered as to how the AO could verify. Therefore, according to ld CIT DR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors u/s 133(6) of the Act. On perusal of the copy of notice issued u/s 133(6) placed at Pages 11 12 of the paper book, it is noted that the AO had made specific and detailed enquiries from both the loan creditors regarding the transaction involving payment of loan to the assessee. The relevant questions posed by the AO in his notice u/s 133(6) have been reproduced at Para 5 above. In response both the loan creditors had furnished the relevant details along with documentary evidences as sought by the AO and copies of these replies were also furnished before the ld. Pr. CIT in the proceedings u/s 263 of the Act. As regards M/s Anadya Technologies Pvt Ltd, which had advanced the majority portion of total loan i.e. ₹ 1,00,00,000/-, it is noted that this company is regularly assessed to tax and is holding PAN AADCA7382F. On perusal of the financial statements furnished in response to notice u/s 133(6) of the Act, we find that the loan creditor had own funds to the tune of ₹ 256.07 lacs out of which it had advanced the loan of ₹ 100 lacs. We also note that the loan creditor did not have any long term borrowings as alleged by the ld. Pr. CIT in the SCN. We further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (a) the company was regularly assessed under the PAN AAACH5090E with ITO, Ward 4(1), Guwahati, (b) it derived interest income of ₹ 59,60,929/- from the money lending business during FY 2013-14and had filed return of income on 26.09.2014, (c) it held registration certificate dated 09.11.1998 issued by Reserve Bank of India permitting the company to carry on NBFC activities, (d) it had own funds of ₹ 1983.13 lacs and had borrowed of ₹ 219.15 lacs in the course of money lending business, out of which it advanced loan of ₹ 27,47,000/- to the assessee, (e) the loan was given through banking channel and the immediate source of fund was also explained, and (f) the loan carried interest of 9% on which the assessee deducted tax u/s 194A of ₹ 46,407/-. On these facts we note that the information gathered u/s 133(6) substantiated the creditworthiness of the loan creditor. It is further observed that M/s Hotahoti Wood Products Ltd is an associate company of the assessee because its Designated Partner, Shri C R Modi is also the Director on the Board of the loan creditor. In that view of the matter the genuineness of the transaction could not be doubted. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as erroneous for the purpose of S.263 of the Act. Coming next to the second limb, the AO's erroneous order can be revised by the CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. For invoking powers conferred by S.263; the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order some real and tangible loss is caused to the interest of the revenue. Their Lordship in the said judgment therefore held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It was further observed that when the Assessing Officer adopts one of the course permissible in law and it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sse has filed the loan confirmation of every loan creditors and it is seen that all the loan creditors have their own PAN. Therefore, there was no adverse Inference is shown on such 'CASS' point. However, it is seen that the assesse has debited a sum of ₹ 576/- under the head 'Interest on Service Tax' and ₹ 3,466/ under the head ' interest on TDS'. Since, the both expenditures are Penal in nature. Therefore, the both amounts ₹ 4,342/- (₹ 576/- + ₹ 3466/- ) are disallowed and added to the total income of the assesse. 14. In the above factual background a presumption can be safely drawn that the AO bore the capacity to draw satisfaction with the explanations furnished by the assessee as well as the loan creditors regarding the loan of ₹ 1,27,47,000/- received during the year and that the AO exercised due care by conducting requisite enquiries in respect of these loan transactions as the circumstances demanded, before drawing plausible inference in favour of the assessee. In this regard we find that somewhat similar issue was considered by the Hon ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This view has been taken by this Court in the matter of CIT v. Shreepati Holdings Finance (P.) Ltd. [ITA 1879 of 2013 dated 5th October, 2013], by the Delhi High Court in CIT v. Vikas Polymers [2012] 341 ITR 537/194 Taxman 57 and in D.G. Housing Projects (supra). In fact the Delhi High Court in D.G. Housing Projects (supra) while so holding placed reliance upon the decision of this Court in Gabriel (India) Ltd. (supra). It is very important to note that the CIT in his order under Section 263 of the Act has recorded the fact that there has been no adequate inquiry. Thus, this is not a case of no inquiry, warranting order under Section 263 of the Act. Thus, this objection on the part of the Revenue, is also not sustainable. 10. The Revenue placed reliance upon the decision of the Delhi High Court in D.G. Housing Projects Ltd., (supra) that as the Assessing Officer had not enquired into the source of the source of the gifts received by the Assessee, the Assessment Order is erroneous. The aforesaid decision holds that the power of Revision under Section 263 of the Act would normally be exercised in case of no enquiry and not in cases of inadequate enq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to invoke Section 69(C) of the Act and treat the expenditure claimed as unexplained expenditure, the Assessee therein withdrew his revised return of income. Once this was done, the Assessing Officer accepted the same and did not make any further enquiry. The CIT in exercise of its powers under Section 263 of the Act noticed that the Assessee had after having pressed his claim for expenditure in cash, withdrew the claim by withdrawing the revised return of income. This was done only after the enquiry had commenced. This withdrawal of revised income and consequent claim for cash expenditure was contrary to the stand of the Assessee himself. This change on the part of the Assessee on commencement of enquiry, made further enquiry into his claim for cash expenditure necessary. In the above facts, the CIT while exercising his powers under Section 263 of the Act found that the facts on record per se mandated an enquiry to be made into the claim of the Assessee and not doing the same resulted in the order being erroneous. Thus, the Bachchan's case was a case where once the claim was withdrawn, then enquiry which was to be conducted, was aborted by the Assessing Officer. Therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read to authorize or give unfettered powers to the Commissioner to revise each and every assessment order. The applicability of the clause is thus essentially contextual. As observed in the preceding paras, the AO had made specific and detailed cross verifications from the loan creditors and the information gathered from them, satisfied the three ingredients embedded in Section 68 of the Act. Apart from making sweeping statements, which have been found to be factually erroneous, no objective material has been brought on record by the ld. Pr. CIT to implicate the assessee or the AO per se of being guilty of non-enquiry. We further find that when confronted with the reasons set out in the SCN, the assessee had led before the ld. Pr. CIT sufficient documentary evidence which proved that the SCN had proceeded on assumption of incorrect facts which were not borne out from the assessment records. It was also established before the ld. Pr. CIT that before completion of assessment, the AO had indeed made enquiries from all the loan creditors u/s 133(6) and only after objective consideration of the evidences furnished, order u/s 143(3) of the Act was passed. On receipt of these objections, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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