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TMI Blog2021 (8) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... out any independent enquiry at his end and thus grossly erred in observing that the order of the Ld. AO u/s 143(3) of the Act is erroneous and prejudicial to the interest of Revenue. In the instant case Ld. Pr. CIT failed to show that both conditions exists i.e. neither it has been proved that order is erroneous nor it has been proved to be prejudicial to the interest of revenue. We thus find merit in the contentions of the assessee that the revisionary order passed by the Ld. Pr. CIT in the years under appeal i.e. A.Y. 2013-14 is beyond the scope of section 263 and hence not valid. Thus the action of the Ld. Pr. CIT is contrary to the ratio laid down by binding precedence. We, therefore, quash the impugned order and decide in favour of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. If the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. The second option available u] s 263 (1) of sending the entire matter back to the AO for a fresh assessment. can be exercised by the PCIT only after he undertakes an inquiry himself and not otherwise. Thus the present order u/ s 263 is vitiated on this ground alone. 2. Brief facts of the case as culled out from the records are that the assessee is a Private Limited Company engaged in the business of purchase, sale, taking on lease, letting out development/ construction of property. E- return of income filed on 27.09.2013 declaring loss of ₹ 51,72,569/- which comprises of depreciation loss at ₹ 1,53,066/- and business loss of ₹ 50,19,503/-. Case selected for scrutiny assessment through CASS for the reason 'large unsecured loans'. Notices u/s 143(2) & 142(1) of the Act duly served upon the assessee along with detailed questionnaire seeking various information from the assessee including the details of unsecured loans. Reply was filed by the assessee repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have inquired about the surrounding circumstances in respect of the loan in question. On verification of details submitted by M/s Gliter Deal Mart Pvt. Ltd it is seen that the registered office of the said C0111pany is based at Kolkata, It is further seen that the company has shown income for A.Y. 2013-14 at ₹ 11,457/-. On perusal of annual account submitted by M/s Gliter Deal Mart Pvt. Ltd it is noticed that the company is having share capital of ₹ 32.42 lakhs and is having security premium account of ₹ 7.96 Crores. Despite having such huge reserves and surplus the company has not shown any significant business transactions and net income for 31.03.2013 is shown at ₹ 3540/- only. As regards the Source of funds it is seen that the lender company has received an amount of ₹ 55,00,000/- from M/s Gielle Investment on 28/02/2013 out of which ₹ 45,00,0001- has been given to the assessee on the same date. In the same way ₹ 30,00,000/- has been received from GielIe Investment on 28/02/2013 and given to the assessee on the same date. It is also observed from the bank account of M/s Glitter that the company has given advances of huge amounts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Ltd., Baroda, loans from the said company was held as unexplained cash credit in the case of Muktilal Laduram Prop. Shivashakti Trading, Co. , Sendhwa for A. Y. 2014-15. Therefore, in this case also the unsecured loan from the said company should have been treated as unexplained cash credit. You are, therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of AO dated 07/03/2016 is erroneous in so far as it is prejudicial to the interest of revenue. 7. You are, accordingly, given an opportunity to attend my office on 25.01.2018 at 3:30 P.M. and produce necessary evidences, explanation, etc in support of your contentions and arguments. If you fail to attend the hearing, it shall be presumed that you have nothing to say in the matter and order u/s 263 shall be passed on merit and on the basis of facts available on record. Yours faithfully, Sd/- (Shelley Jindal) Pr. Commissioner of Income Tax-2 Indore 4. After the issuance of notice u/s 263 of the Act assessee applied for the inspection of the case records and on getting the permission perused the case records observing that post assessment u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. It was also submitted that all the alleged parties mentioned in the show cause notice have given unsecured loans to the assessee through banking channels and there was no cash deposit just before the issuance of cheque/bank transfer to the assessee. All these companies have sufficient financial strength in the form of share capital, share premium and accumulated reserves to lend the money to the assessee company on interest. 6. However, Pr. CIT was not convinced with these arguments and submissions made by the assessee and is of the view that alleged cash creditors in the show cause notice are not companies with requisite finance means so as to provide huge loans to the assessee. Ld. Pr. CIT commonly observed that most of these companies are accommodation entry provider and there are bank transfers from some other companies just before the date of transfer of loan to assessee which are in the form of accommodation entries. Ld. Pr. CIT also referred to legal position regarding the powers u/s 263 of the Act. For sake of convenience the finding of Ld. Pr. CIT is abstracted below: 2.1 I have carefully considered the facts of the case, the assessment records and the written sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity of the depositors and genuineness of the transaction. For example if we take the case of Gliter Dealmark P. Ltd. the company has shown income for AY 2013-14 of ₹ 11,457/-. The company is having share capital of 32.42 lacs and is having security premium of ₹ 7.96 crores. In spite of having such huge funds there is no significant business activity and the income for the year ending 31.03.2013 is only ₹ 3540/-. The company have received ₹ 55 Lacs from M/s Gielle Investment on 28.02.2013 out of which 45 lacs was given to the assessee on the same day similarly, ₹ 30 Lac was received from the same company and given to the assessee on the same day. Incidentally this company i.e. Gielle Investment has also given an unsecured loan to the assessee. An examination of the bank account shows that there are similar circulating entries in the account which show that primafacie the company is involved in providing accommodation entries. This observation significant in the light of detection of several shell companies in Kolkata which were engaged in providing accommodation entries and given bogus share capital. The department of Income Tax, company affairs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating entries in the bank account and insignificant business activity as compared to the funds in the company is also observed in other companies from which the assessee as taken low the names of such suspects companies are mentioned in preceding discussion and alos in the show cause all these companies have made have given unsecured loans of huge amounts. It is also noted that the director of Glitter Dealmark Shri Santosh Jain is also director in one another company namely Crest Vanijya P. Ltd. It is also important to note that the companies such as Bhimtal Nirman P. Ltd., Winsher Commercial P. Ltd., Tropical Vyapar P. Ltd. are operating for the same address at Kolkata and have cross entries of taking and giving loans. As per the preliminary information received from the Investigation Directorate Kolkata, all companies at Kolkata from which the assessee company has taken loan pertain to one group namely Rajesh Jain. It appears that these companies are controlled and managed by same set of persons and it is very suspicious that how three companies fan give loan of several lacs without any security to a company based in Indore. Therefore, the AO should have made further enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the database of bogus LTCG, Penny stock companies available with this office the name of Vishvjyoti Trading Ltd. appears in the list. Therefore, the credentials of this company are doubtful and complete investigation is required to be made in respect of transactions of the assessee with this company also. In this connection, I have also issue a letter to Pr. DIT (Inv.), Mumbai for carrying out the enquiries. Recently information has also been received from Investigation Wing that one of the lenders namely KCL Infra Projects from whom the assessee has taken substantial loan during the year has also been found to be involved in penny stock transactions. Therefore, it appears that this company is also involved in accommodative transactions. The balance sheet of the assessee show in opening balance of ₹ 10,73,677/- and closing balance of ₹ 57,67,284/-. Accordingly, the unsecured loan received from this company is also suspicious and needs to be further investigated. Since, majority of the creditors of the company have been found to be of suspicious nature the undersigned also examined the information received from the remaining creditor companies. It is noted from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the case record and examining information about each creditor. There has been proper application of mind by the undersigned and proper reasons for treating the order of the AO as erroneous have been given it is not a case where blindly the remarks of the audit have been followed without application of mind. The judgments relied by the assessee are also accordingly distinguished. The audit party can point out certain infirmities and mistakes in the order and if after due application of mind the same is found to be correct and actionable, there is nobar and taking the action on such suggestion. Reliance is placed on the judgment of Allahabad High Court in the case of Mannulal Matadeen - 277 ITR 346. It has also been pointed out by the assessee the assessing officer made independent enquiry u/s 133(6). In this conenection it is pointed out that it has been had in the preceding discussion that why the action of the AO in accepting the information was erroneous. The objection is therefore not accepted. The assessee has also pointed out to the internal correspondence which was made by the AO with the undersigned regarding the audit objection in which he had relied on certain jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the acceptance of credits u/s. 68. The judgements are respectfully distinguished as it has clearly been held in the preceding discussion that further enquiries are required to be made to ascertain the creditworthiness and genuineness of the companies. The assessee has also submitted that the loans have been repaid through proper banking channel. The submission has no relevance as the repayment of loan cannot act as a proof of creditworthiness and genuineness of the transaction. 3.0 Legal Position on Power of Commissioner for Revision u/s 263: Case laws on the power of Commissioner, favour Revenue, in folloiwng situations as regards enquiry by Assessing Officer : a. Complete failure to conduct relevant enquiry. b. Conducting enquiry but not taking it to its logical conclusion. c. Conducting enquiry but drawing the wrong conclusion. 6.1 Reference is invited to recent judgement of Kolkata Tribunal in the case of Marigold Nirman Pvt. Ltd. and related cases ITA 1365/KOL/2013 J.DATED 30.07.15, also reported as Subhlakshmi Vanijya (P.) Ltd. in 172 TTJ 721 (KOL) has..........virtually the whole law on 263. It has answered following questions most clarity; Q. Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to inquire into each and every entry recorded in the books of account of the assessee. He has to exercise his acumen in extracting out the relevant points or matters on which he wants to concentrate. But, what is important in this regard is that the operation of section 142(1)/143(2) comes to an end when an assessment is completed after examining such point or matters which the Assessing Officer feels to inquire before finalizing the assessment. It is only thereafter that the revisional powers of the Commissioner under section 263 can come into play for ascertaining if the Assessing Officer examined all the relevant points, which ought to have been eexamined. If the Commissioner, on examination of trecords of assessment, comes to the conclusion that the assessing officer failed to enquire into certain other relevant aspects which, in facts, necessitated thorough investigation, then he has all the power to revise the assessment order. In the instant case, the assessment already stands finalized and now teh Commissioner is examining whether the Assessing Officer properly examined the facts of the case. In such circumstances, it is impermissible to have a reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperly examining the issue of share capital ? Where the Assessing Officer has made proper enquriy and still comes to a wrong conclusion, which renders the assessment order erroneous and prejudicial to the interest of the revenue, it becomes the duty of the Commissioner to expressly point out where the Assessing Officer went wrong on merits. But in a case, where no enquiry has been conducted at all or the so-called enquiry conducted by the Assessing Officer is as good as on enquiry, as is the case under consideration , in such circumstances, the Commissioner simply needs to point out those relevant aspects of assesseent, which the Assessing Officer lost sight of, but were required to be properly probed. There can be no way for the Commissioner to tell erroneous approach of the Assessing Officer on merits in such circumstances because the view of the Assessing Officer on merits is not available. Requiring the Commissioner to indicate where the Assessing Officer went wrong on merits in the cases of no enquiry cases, is like requiring an impossible thing to be done. It is axiomatic that the law does not require an impossible to be complied with. In the instant case the extent of enq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer, could result in a theoretical possibility that it may be revised by the Commissioner under section 263. Such a situation is clearly impermissible. [Para 9] It is also necessary for the parties to know the reasons that have weighed with the adjudicating authority in coming to a conclusion. The order passed by the Assessing Officer should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. [Para 10] Therefore, the matter was to be remanded to the file of the Assessing Officer to decide the issue afresh in terms of the order passed by the Commissioner under section 263. [Para-12] 6.2.3 Jagdish Kumar Gulati [2004] 139 TAXMAN 369 (ALL) When an assessment is done under section 143(3), it is expected that the Assessing Officer will make a detailed enquiry to find out the correct income of the assessee and not to take the facts placed by teh assessee on their face value. No proper enquiry appeared to have been made by the Assessing Officer in the instant case. It is well settled that if the Assessing Officer fails to make a proper enquiry this is erroneous and prejudicial to the interest of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statements which are recorded in the course of search and seizue operations in respect of the very assessee and not in respect of any other person- For the purpose of exercising his power, the examination by CIT is not required to be confined to the record in assessee's case. 6.2.7 [2016] 237 Taxman 211 (Madras) N. Mohammed Ali Vs. Income- Tax Officer, Ward-VII(2), Chennai During relevant year, assessee made cash payments to suppliers of crackers-without examining details of expenditure involved, Assessing Officer allowed said payments- commissioner found that assessee had made cash payments in excess of ₹ 20,000 to some suppliers on day-to- day basis- He thus passed a revisional order disallowing said payments under section 40A (3)- Whether on facts, impugned revisional order did not require any interference- Held, yes [Para-16] [ In favour of revenue] 4.0 Therefore, in view of the above discussion I am of the considered opinion that the order dated: 06.01.2016 for A.Y. 2013-14 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the order without making required enquiries/investigations. Accordingly, I am satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated:12.01.2016 6. Replies alongwith requisite information received from following cash creditors to whom notice u/s. 133(6) were issued :- A M/s. Apanapan Mercantile Pvt. Ltd. B M/s. Bhimthal Nirman Pvt. Ltd. C M/s. Confident Vinimay Pvt.Ltd. D M/s.Crest Vanijya Pvt. Ltd. E M/s. Gielle Investment Pvt. Ltd. F M/s. Tropical Vyapar Pvt. Ltd. G M/s. Winsher Commercial Pvt. Ltd. H Glitter Dealmark P. Ltd. i. Jayant Securities & Finance Ltd. 7. Assessment order dated: 07.03.2016. In the light of show-cause notice u/s.263 issued by your honour, inspection of case records were taken before the learned Assessing Officer. Perusal of case records during the course of insepction reveals that audit objection was raised by the audit party and the same was being dealt with. It seems that to settle the objection of trhe audit reply was forwarded. Thus, it seems that the audit objection may be the route for issue of show-casue notice u/s 263 of the Act. However, it is submitted that it is almost a settled law that on the basis of audit objection or even recommendation of the Assessing Officer, provisions of section 263 cannot be invoked. It is the prerogative of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharged. As such as satisfactory explanation was given it is treated that onus is discharged. Thereafter it is open to the Assessing officer to initiated action against the creditor. In view of the aforesaid discussions and facts of the case and perusal of records reveals that the learned Assessing Officer exercising his quasijudicial power had issued a detailed questionnaire u/s 142 (1) of the Act, which was duly answered by way of various details, explanations and letters. Complete books of account, details of incomes, supported with documentary evidences were produced and examined by the learned Assessing Officer during the assessment proceedings. The counsel of the assessee company had appeared before the learned Assessing Officer and filed replies. Thereafter, after due/required enquiry/ verification u/s 133(6), which shyould have been done at the end of the learned Assessing Officer, order was passed u/s.143(3). Thus, the prime reason so mentioned in the show-cause notice for invoking of section 263 is without making required enquiries/investigation is having no force. Our contention finds support from the decision of Hon'ble Delhi High Court in the case CIT-IV v. Hotz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in law. CIT v. Max India Limited 295 ITR 282(SC), Malbar Industries Co. Ltd. v. CIT 243 ITR 83 (SC); d. Since the Assessing Officer made proper enquiry and examined accounts, it could not be said that there was non-application of mind by him. Hence, the action under section 263 was held invalid. Antala Sanjay Kumar Raviji Bhai V. CIT 135 ITD 506 (Rajkot) (Trib.), Roshan Lal Vegetable Products (P) Ltd. v. ITO 51 SOT 1 (URO) (Asr.)(Trib.), Fine Jewellery (India) Ltd. v. ACIT 19 ITR 746 (Mum.) (Trib.); e. In case, where the High Court found that the Assessing Officer examined all the details with respect to assessee's claim of deduction, the order could not be said to be erroneous or was passed without application of mind merely because the same was not elaborate order. CIT v. Design & Automation Engineers (Bombay)(P) Ltd. 323 ITr 632 (Bom.)(HC), Manish Kumar v. CIT 134 ITD 27 (Indore) (Trib); f. Prakash Asphalting & Toll Highways (India) Ltd.Vs. Pr. Commissioner of Income Tax (ITAT, Indore Bench, Indore) (32 ITJ 141); g. Shri Narayan Tatu Rane vs. ITO, Mumbai (Mumbai ITAT). h. It the Income Tax Appellate Tribunal, Delhi "A" Bench, New Delhi in ITA No. 3206/DEL/2017, M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elaborately. It is pertinent to note that the Hon'ble Supreme Court in the case of Malabar Industrial Co. Limited v. CIT 243 ITR 83 (SC), have held that when the Assessing Officer takes one of th two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. In this regard reliance is also place on the following decisions :- a. Section 263 does not visualize a case of substitution of judgment of Commissioner for that of the Assessing Officer, unless the decision is held to be erroneous. Antala Sanjay Kumar Ravjibhai v. CIT 135 ITD 506 (Rajkot) (Trib.), Manish Kumar v. CIT 134 ITD 27 (Indore) (Trib.) b. The error envisaged by Section 263 is not one that depends on possibility or guess work, but it should actually be an error either of fact or of law. ACIT v. Technip Italy Spa 150 Taxman 13 (Delhi) Trib.), Pratap Footwear v. ACIT SOT 638 (Jabalpur) (Trib.). c. CIT v. Gabriel India Ltd. [203 ITR 108] Bom HC). From the aforesaid discussions it is clear that the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessing officer at his own collected the above information/evidences directly from the loan creditor companies, u/s 133(6) of the Act. It is also, a fact appearing from the assessment order that the Assessing Officer has not disputed the correctness of all these documents or made any adverse comments in respect of the same. Further, there is no adverse information from Investigation Wing or from any other source. These facts with supporting evidences, therefore, cumulatively prove the identity of the loan creditors, their crteditworthiness and genuineness of the transactions. There is thus no ground or basis to dispute the correctness of the loan transactions as the same is fully supported from facts and settled legal principles laid down from time-to-time. Therefore, the onus cast on the assessee u/s 68 of the Act was duly discharged by it. Therefore, when all the ingredients contained in section 68 are fulfilled, there is hardly any scope to invoke the provisions of section 263 of the Act, alleging introduction of unexplained funds in the form of cash credits. The burden so shifts on revenue to establish that such credits has actually come from Asseessee Company itself. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194 Taxman 57 (Delhi) (HC) b. S. Murugan. V. ITO 135 ITD 527 (Chennai) (Trib.), c. J.K. Construction Co . v. ITO 162 Taxman 46 (Jodhpur) (Trib). In viewof the facts of the case and legal position on this issue, it is therefore, prayed that the proposal of reassessment by invoking the provisions of section 263 may kindly be dropped. Without prejudice to the above as far as merit of the issues reaised in show-cause notice in question are concerned, we have to submit that the learned Assessing Officer has issued notices u/s 133(6) in loan creditor companies (supra). That after getting the requisite details and satisfying with the documents / evidences, the learned Assessing Officer has accepted all the loan credits as genuine. This, from the perusal of the audit objection reveals that audit party was satisfied with the enquiries and the issues under the present assessment related to credits on account of acceptance of loans, which was explained and justified initially by providing requisite details by the assessee company and subsequently independent enquiries were made by the learned Assessing Officer by way of issue of notice u/s 133(6). Such details must have been examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same appears to be paper companies created through the receipt of huge premiums on shares which itself is doubtful. Further, the source in the hands of these companies RTGS/ Chequs received from some other parties on the very same day is a guess work. It is pertinent that when audit party was satisfied with remaining companies, after perusal of compliances and information obtained u/s 133(6), there seems to be no reason to raise doubt, only based on presumption. That being finance companies, funds were utilized for optimum yield and thus, the observation that funds were received on the same day through RTGS/ Cheques, is having no force. It is also, pertinent to note that funds with the loan creditor companies are not pertaining to the year in question. Even though in support of genuineness we are enclosing herewith copies of assessment orders passed in the case of following companies, wherever possible:- a. Tropical Vyapaar P.Ltd.; b. Bhimatal Nirman P.Ltd; c. Winsher Commerical P.Ltd.; As regards the observation regarding unsecured loan shown in the name of M/s Jayant Securities & Finance Ltd. At ₹ 1,85,50,000/- even no question was raised on the genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT while giving finding of setting aside the issue to the Ld. Assessing Officer for examining the unsecured loans has directed to examine all the 21 cash creditors who gave unsecured loans of ₹ 21.07 cr. which in view of ratio laid down in following decisions was not correct as the order u/s 263 of the Act cannot travel beyond the show cause notice:- a. CIT vs. Contimeters Electricals (P) Ltd. [2009] 317 ITR 249(Delhi) b. CIT vs. Ashish Rajpal [2010] 320 ITR 674 (Delhi) c. CIT vs. D.N. Dosani (2008) 280 ITR 275 10. Ld. Counsel for the assessee also submitted that ld. Pr. CIT has himself observed that the source of unsecured loans received from the alleged cash creditors was transferred from other companies to the cash creditors. So the source of source is through banking channel only. Most of the cash creditors have been assessed under the provisions of section 143(3) of the Act and no adverse view has been taken by the revenue authorities in the assessment order so passed. All the cash creditors are having sufficient funds to give loan to the assessee. They are having sufficient share capital, share premium and reserves & surplus and also carrying out regular busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion), Bhopal, Ahmedabad and Nagpur but surprisingly, Ld. Pr. CIT has passed the impugned order without receiving any replies to the letters so sent which shows that the impugned order was passed by the ld. Pr. CIT without conducting any further enquiry which in itself makes the proceedings void in view of the judgment of Hon'ble Delhi High Court in the case of D.G. Housing Projects Ltd. 92012) 343 ITR 329 (Delhi). 14. Further reliance was also placed on the following decisions: S.NO PARTICULARS PAGE NOS. 01 Cadila Pharmaceuticals Ltd (ITAT Ahmedabad Bench) 01-10 02 Madhusudan Industries Ltd (ITAT Ahmedabad Bench) 13-22 03 Pr Commissioner of Income-Tax Vs Narayan Balmukand Dubey [2017 30 ITJ 335 (M.P)] 23-35 04 Director of Income Tax Vs Jyoti Foundation [(2013) 357 ITR 355 (Delhi)] 36-41 05 Commissioner of Income Tax VS Ratlam Coal Ash. Co [(1988) 171 ITR 141 (M.P)] 42-43 06 Commissioner of Income Tax Vs Mehrotra Brothers [(2004) 270 ITR 157 (M.P)] 43-44 07 Commissioner of Income Tax, Delhi Vs International Travel House Ltd [(2012 ITR 554 (Delhi)] 45-51 08 Income Tax Officer Vs D.G Housing Projects Ltd. [(2012) 343 ITR 329 (Delhi)] 52-59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records and Ld. AO duly replied to the audit team. 18. However, Ld. Pr. CIT has observed that he had made an independent decision on the basis of his examination of assessment records to invoke the provisions of section 263 of the Act and issued show cause notice. 19. Before proceeding to examine the facts of the case as to whether Ld. Pr. CIT has rightly assumed jurisdiction u/s 263 of the Act and whether he has justified in holding the order of Ld. A.O as erroneous and prejudicial to the interest of revenue, we will first go through the relevant provision of Section 263 of the Act and settled judicial precedence:- 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.--In computing the period of limitation for the purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 20. On a bare perusal of the sub-section (1) would reveal that the powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to the assessment order only. It cannot be argued that there is some possibility of the assessment order being challenged or revised in appeal and, therefore, on account of this contingency, the order becomes prejudicial to the interests of the revenue." [emphasis supplied] 23. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983- 84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied] 25. Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy - [1985] 20 Taxman 65 - order pronounced on 19.03.1984 - Para 10 - "Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue. Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not feel satisfied with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course assessment proceedings on the relevant issues and the assessee has detailed explanation by a letter in writing and the Assessing allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be simply because in his order he does not make an elaborate discussion in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted sufficient enquiry with regard to unsecured loans taken by the assessee company during the year. It is not disputed at the end of Revenue that notice issued by the Ld. AO under CASS was with regard to the reason of 'large unsecured loans' received by the assessee during the year. After selecting the case for scrutiny under CASS, notices u/s 143(2) & 142(1) were served on 29.12.2014and17.11.2015 which was replied on 30.12.2015 enclosing copy of ITR computation, details of business, bank statement and tax audit reports. Again a detailed questionnaire was issued on 12.01.2016 in connection to assessment proceedings directing to the assessee to reply to 24 points which included various details of items appearing in profit and loss and balance sheet. Specific information was called by Ld. AO with regard to unsecured loans taken during the year in point nos.15 to 19 which are reproduced below: 15. Please give the details of any loans or deposits or the aggregate of any such loans or deposits exceeding ₹ 20,000/- or more taken or accepted otherwise than by an account of payee cheque or account payee bank draft. If there are any, you are requested to explain the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buy peace and avoid litigation with the department. 2. Confirmation, balance sheet, profit & loss account & acknowledgement of Gille Investment Limited has been annexed in Annexure No.2 31. Again on 08.02.2016 another reply was submitted, replying to the points raised by the Ld. AO and in para 11 of this reply (page on 175 of the paper book) assessee filed the confirmation of the unsecured loans audited balance sheet, bank statement, acknowledgement and computation of Income Tax returns of following lender companies: 1)Apnapan Merchantile Private Limited 2)Beryl Drugs Limited 3)Beryl Securities Limited 4)Bhimtal Nirman Private Limited 5)5) CMM Infraprojects Limited 6)Confident Vinimay Private Limited 7)7) Creative Technochem Private Limited 8)Crest Vanijya Private Limited 9) Dishman Pharmaceuticals and Chemicals Limited. 10)Enit investment Private Limited 11)Hitwin Finance Company Private Limited 12) Gliter Deal Mart Private Limited 13) JV Modi Securities Private Limited 14) Jayant Securities and Finance Limited 15)Jay Jyoti India Private Limited 16)KCL Infraprojects Limited 17)Palasia Leasing and Investments Private Limited 18)Ronima Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Regarding M/s Apnapan Mercantile Pvt. Ltd. 1 Submission made in response to notice u/s 133(6) of the act dated 22.2.2016 along with annexures 67 C-1 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 68 C-2 Audit Report for the F.Y. 2011-12 & 2012-13 69-88 C-3 Bank Statement from 09.10.2012 to 04.01.2013 89-90 D Regarding M/s Crest Vanijya Pvt. Ltd. 1 Submission made in response to notice u/s 133(6) of the act dated 23.2.2016 along with annexures 91 D-1 Income Tax return (ITR) acknowledgment for A.Y. 2012-13 & 2013-14 92-93 D-2 Audit Report for the F.Y. 2012-13 94-104 D-3 Loans & advances (Group Summary) 105 D-4 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 106 D-5 Bank statement from 01.09.2012 to 05.12.2012 107 D-6 Copy of Postal Acknowledgment 108 E Regarding M/s Bhimtal Nirman Pvt. Ltd. 1 Submission made in response to notice u/s 133(6) of the act dated 23.2.2016 along with annexures 109 E-1 Income Tax return (ITR) acknowledgment for A.Y. 2012-13 & 2013-14 110-111 E-2 Audit Report for the F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO it can be safely construed that the Ld. AO made detailed enquiry, made proper application of mind and examined all the cash creditors by calling various information and was satisfied with the three parameters i.e. identity of lender, genuineness of loan transaction and creditworthiness of lender company and was further satisfied that none of these unsecured loans fall under the category of unexplained cash credit u/s 68 of the Act. Thus after examining the facts of the case we find that a detailed enquiry was conducted by the Ld. AO and he adopted one of the possible view permissible in law and completed assessment u/s 143(3) of the Act. 35. Hon'ble Supreme Court in the case of CIT Vs. Max India 295 ITR 282 (SC) held that "the phrase "prejudicial to the interests of the Revenue" in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has OM Prakash Badaya directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent_s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent source. Then Ld. Pr. CIT mentions that "it appears that somebody on behalf of those parties filed the information". 40. Again with regard to information filed in the case of M/s. Jayant Security Finance Ltd. it is mentioned that "subsequently somebody filed the information/confirmation". Similarly, he calls for a report from Investigation wing but he does not wait for it before framing his view. So it is an admitted fact that no new enquiry was conducted by ld. Pr. CIT to come to the conclusion of holding the assessment order as erroneous so far as prejudicial to the interest of revenue even when he himself mentions that the various enquiries were conducted by the Ld. AO including the information called u/s 133(6) of the Act but still terms it as inadequate enquiry. 41. We observe that there is no specific procedure provided under the Act or Rules to examine the unsecured loans/cash credits regarding the three aspects i.e. identity, genuineness and creditworthiness and Ld. Assessing Officer vests with a discretion to be satisfied on the basis of documents which he/she deems fit to be called for. Ld. AO is a quasi-judicial authority vested with the same powers as are vested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 475 7,79,42,367 Gills Investment Ltd. 6,00,000 4,89,498 23,71,254 42. Further it is also appearing from records that out of the 9 parities in case of 8 cash creditors' assessment u/s 143(3) of the Act have been completed in A.Y.2012-13 to 2014-15 and the revenue's authorities have not made any such addition for unexplained investment and unexplained cash credit in their hands. This fact has been accepted by the Ld. Pr. CIT also that in all cases there was a corresponding bank entry in the account of cash creditors out of which few were from the alleged parties also. For instance of M/s. Gliter Deal Mark Pvt. Ltd. gave unsecured loan of ₹ 75,00,000/- to assessee for which M/s. Gliter Deal Mark Pvt. Ltd. received sum of ₹ 55,00,000/- and ₹ 44,00,000/- from M/s Gielle Investment Pvt. Ltd. on 28.02.2013 and this fund was used to give loan to the assessee companies. So even the source of source has been mentioned and accepted by Ld. Pr. CIT in case of few cash creditors. 43. Even one of the alleged cash creditor namely M/s. Jayant Securities & Finance Ltd. which Ld. Pr. CIT has referred as an accommodation entry provider, it is revealed that this company is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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