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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 ..... r Ganguly Projects' and disclosed the total turnover of Rs. 90,25,099/- along with income from other source amounting to Rs. 21,768/-. Since the assessee's case was selected for scrutiny through CASS with the reasoning 'unsecured loans were taken from persons who have not filed their ITR', the AO therefore asked the assessee to file loan confirmation of every loan creditors. Pursuant to which, the assessee filed the list of loan creditors along with their PAN details etc, which has been acknowledged by the AO. It was also brought to our attention that prior to completion of assessment, the AO had also made enquiries from the loan creditors u/s 133(6) of the Act, who all had advanced fresh loans/advances to the assessee during the year, which were also duly complied by each of them. Thereafter, the AO records specific finding that there was no adverse inference needs to be drawn on CASS point. The AO accordingly concluded the assessment after making additions of Rs. 1,90,792/- at total income of Rs. 10,66,260/- by an order dated 22-08-2016. Thereafter, the ld. PCIT has issued show cause notice dt. 13-03-2019 to the assessee by stating as under:- "2. It is seen that your return fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing the identity ... ' 7. In view of the above, the order passed u/s.143(3) dated 22-08-2016 appears to be erroneous in so far as it is prejudicial to the interest of Revenue and accordingly, proceedings u/s. 263 of the I.T Act, 1961 is being initiated in your case". 4. In its reply dated 18-03-2019, the assessee furnished its objections to the SCN. The assessee brought to the notice of the ld. PCIT that on the issue of loan creditors, specific queries were raised by the AO and in pursuance of it, the assessee had filed before him (the AO) all details along with documents, PAN, etc about loan creditors, who after conducting enquiries with the loan creditors and thereafter being satisfied with the result of his enquiry, has not drawn any adverse view against the loan creditors or assessee, which is clear from para-2 of the assessment order itself. The assessee further brought to the notice of the Ld. Pr. CIT, that out of the four bodies corporate named in the SCN, the impugned loan amount of Rs. 1,27,47,000/- was received from two of them, namely M/s Anadya Technologies Pvt Ltd & M/s Hotahoti Wood Products Ltd during the relevant FY 2013-14. However, the ld. PCIT did not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Balance amount of loan is to be paid as on 31.03.2014 Remarks as Highlightin g in the Bank Statement submitting Bank Statement of the Transaction Loan was given to 'CITY STAR GANGULY PROJECTS LTD', Duly signed by you Highlighting the amount in Balance Sheet as at 31.03.2014 producing copy of the Balance sheet as at 31.03.2014 duly signed by you. Producing signed copy of Balance Sheet as at 31.03.2013 is must. Loan given Rate of interest, pl. produce the relevant documents providing documents showing P & L accounts as at 31.03.2014 Thereafter, ld.AR pointed out that the ld. Pr. CIT had wrongly alleged that the company had taken unsecured loan of Rs. 1,27,47,000/- during the year from four bodies corporate which were not verified by the AO whereas the facts on record showed that the impugned loan amount of Rs. 1,27,47,000/- was obtained as loan from only two bodies corporate. He further pointed out that the ld. Pr. CIT was factually wrong in alleging that the AO did not make any enquiries u/s 133(6) from M/s Purbanchal Prestressed Ltd from whom the assessee had taken loan during the year. Referring to the facts on record, he submitted that the AO had indeed made enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his factual backdrop, the ld. AR submitted that all these material facts and evidences were available before the AO, who upon considering the same had accepted the creditworthiness of the loan creditors and genuineness of the transactions. He thus argued that not only the factual averments made by the ld. Pr. CIT in the SCN as also in impugned order were erroneous and unjustified but even his finding that the AO did not enquire into the creditworthiness and genuineness of loan creditors was unsustainable on the facts and also in law. 6. He further submitted that the ld. Pr. CIT never disputed the fact that the AO had indeed enquired into the transaction involving receipt of unsecured loans and therefore it was not a case of 'lack of enquiry'. He pointed out that the AO treated the impugned order as erroneous and prejudicial to the interest of the Revenue because according to him further inquiry/investigation was required or deeper or further scrutiny should have been undertaken. Relying on the decisions of the Hon'ble Bombay High Court in the case of CIT Vs Nirav Modi (390 ITR 292), Hon'ble Delhi High Court in the case of CIT Vs Leisure Wear Exports Ltd (341 ITR 166) and Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the usurpation of jurisdiction by the ld. Pr. CIT u/s 263 of the Act on the grounds set out in the SCN. It is noted that the impugned loan of Rs. 1,27,47,000/- is the subject matter of SCN issued u/s 263 of the Act, which the assessee received from two bodies corporate i.e. Anadya Technologies Pvt Ltd & Hotahoti Wood Products Ltd. Although in the SCN, the ld PCIT while proposing to usurp the revisional jurisdiction found fault with the Assessment order on the ground of non-enquiry by AO into the loan transaction by the assessee with M/s Purbanchal Prestressed Ltd, which we find that enquiry under Section 133(6) was in fact carried out by the AO from the said party and evidence in support of compliance made by the said party was also furnished before the ld. Pr. CIT. We therefore note that since the evidence led by the assessee in this regard was found to be factually true, the ld. Pr. CIT did not pursue this ground any further while passing the impugned order. We therefore have 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. 9. We shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned huge unsecured loans is factually incorrect and unfounded. The loan confirmation furnished by M/s Anadya Technologies Pvt Ltd further revealed that the assessee had also paid interest at the rate of 9% on the loan which worked out to Rs. 8,35,890/- on which tax of Rs. 83,589/- was withheld (TDS) and deposited in the PAN of the loan creditor u/s 194A of the Act. Note No. 17 of the financial statements read with the details of accounts enclosed at Page 32 of the paper book further reveals that the payee had duly recognized the interest income in its Profit & Loss Account and offered the same to tax. The bank statement of M/s Anadya Technologies Pvt Ltd which is available at Page 33 of the paper book further shows that the transaction involving payment of loan was done through banking channel and the source of funds is also self-evident from the bank statement. It is noted that there was no cash deposit prior to advancement of loan by M/s Anadya Technologies Pvt Ltd. It also seen that besides the interest of Rs. 8,35,890/-, the loan creditor had reported overall interest income of Rs. 31,60,575/- which proved that the loan creditor was regularly earning interest income on loans gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of the Act. To adjudicate this issue we have to first see whether the requisite jurisdiction necessary to assume revisional jurisdiction existed before the Pr. CIT exercised his powers. For that, we have to examine whether in the first place the order of the Assessing Officer found fault by the Principal CIT, was erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the CIT. The twin conditions which need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and (ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 enquiries made u/s 133(6) (as discussed supra), the loan creditors have filed their documents/details to substantiate/prove their identity(ies), creditworthiness and genuineness of the loan transactions. Thus, we find that the AO had examined all the details and called for financial statements of the loan creditors for verification of the loan transactions. Having done so, the AO has not drawn any adverse inference against any loan creditors, which has been recorded in para 2 of his assessment order, which is as under:- "2. During the year under assessment the assesse was engaged in construction business under the name and style of 'M/s CITY STAR GANGULY PROJECTS' and disclosed the total turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing on record to indicate that the evidence produced is not reliable and the Assessing Officer was satisfied with the same, then it is not open to the CIT to exercise his powers of Revision without the CIT recording how and why the order is erroneous due to not examining the donors. Thus, this objection to the impugned order by the Revenue is also not sustainable. 9. It was next submitted that no enquiry was done by the Assessing Officer to find out whether the donor Mr Deepak Modi (father) had received money from M/s. Chang Jiang as claimed. Nor any inquiry was done to find out whether the sister had in fact earned amounts on account of Foreign Exchange Transactions as claimed by her. We find that this enquiry of a source of source is not the requirement of law. Once the Assessing Officer is satisfied with the explanation offered on inquiry, it is not open to the CIT in exercise of his revsional powers direct that further enquiry has to be done. At the very highest, the case of the Revenue is that this is a case of inadequate inquiry and not of "no enquiry." It is well settled that the jurisdiction under Section 263 of the Act can be exercised by the CIT only when it is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 68 of the Act. In this case, the order passed by the Assessing Officer is not per se erroneous and further the CIT has not given any reasons to conclude that the order is erroneous. In fact, he directs the Assessing Officer to find out whether the order is erroneous by making further enquiry. This the decision of the Delhi High Court in D.G. Housing Projects Ltd. (supra), clearly negates. In the above view, the decision of Delhi High Curt in D.G. Housing Projects Ltd. (supra) would not assist the Revenue in the present facts. 11. Further, reliance is placed upon by the Revenue upon the decision of the Apex Court in Amitabh Bachchan (supra) to impugn the order of the Tribunal. In the facts of the Supreme Court decision, the Respondent-Assessee had filed a revised return, claiming additional expenses. During the Assessment Proceedings, the Assessing Officer called upon the Assessee to furnish the details with regard to the expenses claimed to be incurred. The Assessee therein pointed out that the payments for expenses had come out of cash balance available with him. When the Assessing Officer commenced enquiry in respect of the claim of expenditure out of cash balance av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan (supra) has observed that there can be no doubt that where the view taken by the Assessing Officer is a possible view, interference under Section 263 of the Act, is not permissible. 13. In view of the above, the questions as framed stands concluded by the decision of this Court in Gabriel (India) Ltd. (supra). Thus no substantial questions of law arises for our consideration." 15. We are also alive to clause (a) of Explanation (2) to Section 263 of the Act inserted by Finance Act, 2015 w.e.f. 01.06.2015 which seeks to clarify that the order passed by the lower authorities to be erroneous in so far as prejudicial to the interest of the Revenue in the event of absence of inquiry which should have been made. The aforesaid clause only provides for situation where inquiries or verifications should be made by reasonable and prudent officer in the context of the case. Such clause cannot be read to authorize or give unfettered powers to the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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