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TMI Blog2021 (5) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... heard. Also gone through the order ld PCIT passed by him under section 263 and noted that assessee has been given enough opportunity of being heard on the issues raised by ld PCIT. All notices issued by the ld PCIT covered all the issues raised by the ld PCIT under section 263 of the Act and AR of the assessee was aware about all these issues and in fact submitted reply to the ld PCIT during 263 proceedings in respect of these impugned issues. Hence, the contention of the ld Counsel for the assessee that these issues were not part of the show cause notice under section 263 of the Act, is not acceptable, in the light of the bare facts narrated above. The contention of the ld Counsel that Ld PCIT has issued notice only for Loans and not for Advances , is not tenable. We note that ld PCIT has found out specific mistakes in the assessment order framed by the assessing officer. The ld PCIT has used the terminology advance received which is nothing but unsecured loans , vide para 4(i) of PCIT order. Therefore, to use the different terminology to address an issue in the order, (which gives the same meaning), does not vitiate the order of ld. PCIT. Unlike the power of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including issues which are not part of revision order. 2. The learned CIT has also erred treating the assessment order as erroneous and prejudicial to revenue on account of issue of booking advances from Shamco of ₹ 10.00 Lakh and to hold that provision of 68 do apply to advances with the same force the learned CIT has also erred in setting aside order for all advances which are not part of show cause notice. 3. The learned CIT has also erred treating the assessment order as erroneous and prejudicial to revenue on account of issue of loan from Shri Pratapchandra Naik and has also not given in specific finding after submission of documents to treat as erroneous and prejudicial to revenue. 4. The learned CIT has erred to treat the order as erroneous and prejudicial to revenue on the issue of all unsecured loans generally without differentiating in all cases and to hold that in the absence of cheque no., bank account no., bank branch address makes the confirmations invalid in eyes of law and the learned CIT has also erred to substitute his own view when the AO himself had conducted an inquiry. 5. The learned CIT has erred to treat the orders as erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsy and main grievances of the assessee. With this background, we summarize and concise the grounds raised by the assessee, as follows: The learned PCIT has erred treating the assessment order as erroneous and prejudicial to revenue on account of the following issues: (i) Issue of booking advances from Shamco of ₹ 10.00 Lakh. (ii) Issue of loan from Shri Pratapchandra Naik. (iii) Issue of all unsecured loans. (iv) Issue of expenses sundry creditors (v) Issue of agriculture income 4. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is an individual and filed his return of income on 08.10.2013 declaring total income of ₹ 1,39,930/-. The assessee`s case was selected for Scrutiny and the assessment under section 143(3) of the Act was framed by assessing officer on 19.12.2014, determining total income of ₹ 2,59,930/-. 5. Thereafter, Learned Principal Commissioner of Income Tax, Valsad [in short ld. PCIT ] has exercised his jurisdiction under section 263 of the Income Tax Act. The ld PCIT observed that assessment order framed in the assessee`s ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan confirmation in respect of the unsecured loans claimed to have been taken from Shri Pratapchandra P. Naik, when examined shows that the said confirmation has no PAN mentioned on it. Therefore, the first requirement of section 68 i.e. the identity of the cash creditor itself is not fulfilled. The other requirements of creditworthiness of the lender/cash creditor and genuineness of the transaction, needless to say, remain unexamined by the AO. (iii) Similarly, in respect of other loan confirmations, there are following defects which make the loan confirmations invalid in the eyes of law. None of the loan confirmations have the details of cheque no., bank account no., bank branch address mentioned which makes the loan confirmation, a useless piece of paper which cannot be verified with respect to its correctness in the absence of the relevant particulars of payment received from such creditors. Further, the AO has not bothered to obtain any documents in support of source of funds in respect of these unsecured loans. The third requirement of section 68 i.e. the genuineness of the transaction has not been and could never have been verified in the absence of relevant parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of revenue. Since, this letter is important from the point of view of the contentions raised by the assessee and rebuttal thereof by the department, the contents of the letter is reproduced below: No. Pr. CIT/VLS/H./263/2016-17 Date:- 06.03.2017 To, Shri Ramjibhai Virji Joyshar, Kalpvrukh, Pali Hill, E-Road, Tithal Road, Valsad-396001 Sub:-Proceedings u/s. 263 of the I. T. Act, 1961 in your case for A. Y. 2012-13- reg. Ref:- Your letter No. Nil dated 06.03.2017. Please refer to above. 2. The contentions raised vide above referred to letter submitted by your AR Shri Bipin R. Shah, CA, and submitted during the course of hearing on 06.03.2017 are being replied to rebutted as follows: - (a) copy of ledger account is not the same thing as confirmation in respect of advance claimed to have been received from M/s. Shamco. Legally speaking the AO has no authority to consider and accept the copy of ledger account as confirmation and the provisions of 68 do apply to the advance under consideration with the same force as in the case of an unsecured loan. (b) The loan confirmation from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in view of his discretion. The requirement of law mandates that some reasonable inquiry is required to be made in respect of all material issues which have a bearing on v the income returned by the assessee. 3. Therefore, in view of the above, the contention raised by you are without any basis and you are required to submit the documents in respect of which the assessment order of the AO has been found to be erroneous and which has been mentioned in para-4(i) to (v) of this office notice u/s. 263 dated 16.02.2017; The next date of hearing in your case is being fixed on 10.03.2017 at 3.00 P.M. at the request of Shri Bipin R. Shah, CA and your AR. [Satbir Singh] Pr. Commissioner of Income Tax Valsad 7. In response to the above show cause notice, the assessee filed some details before PCIT, vide letter dated 10.03.2017. However, the assessee did not file the entire details and documents asked by ld PCIT, therefore, ld PCIT asked the assessee to submit remaining documents and details. The assessee submitted remaining details and documents on 22.03.2017 enclosing the loan confirmations and copies of bank statement in respect of two parties namely Pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee from various parties. While verifying the creditworthiness of the lenders/cash creditors and the parties who have given advances the provisions of section 68 should be properly investigated. Since, in the present case, besides availability of only part details, the assessee did not furnish the documents in support of sources of funds, and the AO also did not ask for further details/question about the sources of funds, the order of the AO became defective/erroneous on account of absence of any inquiry by the AO which was mandated in the facts and circumstances of this case. (iv) Except that the amount of agricultural income is small, no documents have been filed which could support the factum of assessee having received the agricultural income of ₹ 94,700/-. The AO should verify the fact. While doing so, it must be kept in mind that the mere ownership of land does not mean that the assessee has actually carried out the agricultural operations. Therefore, the AO should look into the purchase of agricultural inputs, carrying out of tilling and other agricultural operations and sale of agricultural etc. so that the claim of the assessee can be verified for ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the facts of the case including the findings of the ld. PCIT and other material brought on record. The law with regard to exercise of jurisdiction u/s 263 of the Act on the ground that the AO failed to make enquiries which he ought to have made in the given circumstances of a case is well settled. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month looking to the various parameters involving house hold expenses and addition of ₹ 1,20,000/- is made to the total income of the assessee but the assessee has not filed any reply to this also. Under such circumstances, I hold that the assessee has not shown any withdrawal to meet the requirements of him and his family members. I, therefore, estimate the household expenditure at ₹ 10,000/- per month for the whole family. The total household expenses as per the estimate comes to ₹ 1,20,000/-. As such, an addition of ₹ 1,20,000/- is made on account of low household withdrawal to the total income of the assessee. 5. Subject to the above remarks and after discussion, the total income is computed as under:- Total Income as per computation of Income. ₹ 1,39,930/- Add: Addition on account of low house hold withdrawal ₹ 1.20.000/- Total Income ₹ 2,59,930/- Agriculture Income (for rate purpose) ₹ 94,700/- 15. We note that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advances from Shamco group company -Swan Tripaulin industry No yes 75000 Even final ground for direction is to find out source of source of which is different than shown in show cause for difference of 7.5 lakh in balances with opposite party and that too in not following in current A.Y. Booking advances from Kishore NO NO 444700 The issue in show cause was only regarding advances from Shamco Plastic group companies.The PCIT has given direction in general for all advances without specifying any specific name,difference between all advances and reason for treating as Erroneous and prejudicial. Booking advances from Taslim NO NO 444700 The issue in show cause was only regarding advances from Shamco Plastic group companies. The PCIT has given direction in general for all advances without specifying any specific name,difference between all advances and reason for treating as Erroneous and prejudicial. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Having gone through the above provisions of section 263 of the Act, we noticed that there is no requirement to issue show cause notice under section 263 of the Act, the requirement is to give an opportunity of being heard. 19. We have also gone through the order ld PCIT passed by him under section 263 of the Act, dated 23.03.2017 and noted that assessee has been given enough opportunity of being heard on the issues raised by ld PCIT. The ld PCIT has issued a show cause notice under section 263 of the Act on 16.02.2017 ( vide para no.4 of PCIT order). In response to this notice, AR of the assessee, Shri B.R. Shah, CA attended the office of ld PCIT on 27.02.2017 ( vide para no.5 of PCIT order). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proposition as stated above from the judgment of the Hon ble Supreme Court in the case of Commissioner of Income Tax Vs. Amitabh Bachchan,Supreme Court of India, (2016) 384 ITR 0200 (SC), wherein it was held as follows: 10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre- condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery narrow. All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice and if he was so required what that notice should have contained? Our answer to that question has al- ready been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 33-B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33-B does not in ex- press terms require a notice to be served on the assessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of no- tice under Section 34 cannot, therefore, be applied to a proceeding under Section 33- B. (Page 827-828). [Note: Section 33-B and Section 34 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l grounds not mentioned in the show cause notice, he ought to have given another show cause notice to the assessee on those grounds and given him a reasonable opportunity of hearing before coming to the conclusion and passing the final revision order. In the case on hand, the CIT has not done so. Thus, the order u/s 263 is violative of principles of natural justice as far as the reasons, which formed the basis for the revision but were not part of the show cause notice issued u/s 263 are concerned. The order of the CIT passed u/s 263 is therefore liable to be quashed in so far as those grounds are concerned. 13. The above ground which had led the learned Tribunal to interfere with the order of the learned C.I.T. seems to be contrary to the settled position in law, as indicated above and the two decisions of this Court in Gita Devi Aggarwal (supra) and M/s Electro House (supra). The learned Tribunal in its order dated 28th August, 2007 had not recorded any finding that in course of the suo motu revisional proceedings, hearing of which was spread over many days and attended to by the authorized representative of the assessee, opportunity of hearing was not afforded to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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