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TMI Blog2021 (10) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... at this issue has been examined by A.O. and thus no proceedings U/s 263 could have been invoked. Assessee has obtained unsecured loans from 22 parties but creditworthiness or none of them was verified by the A.O. - After examining the entre records and after hearing the parties, we have also found that AO after having examined all the details had not drawn any adverse inference against any loan creditors and did not follow a view 'unsustainable in law' and thus, in our view, the assessment order was not the result of non-application of mind or any inadequate enquiry, therefore, in these circumstances, the invocation of jurisdiction U/s 263 was untenable and unsustainable in law. The courts across the spectrum have unanimously held that the order of AO can be brandished as erroneous if it is unsustainable in the eyes of law - Unexplained money received from FDRs - From the perusal of bank statement, it is obvious that the immediate source of money given to the asseesee as unsecured loan was the proceeds realized by Virendra Agarwal HUF from the FDRs. Thus, in this way, the money received from FDRs constituted the source of unsecured loan given to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of unsecured loan, therefore, the comparison of current income with the amount of unsecured loan does not have any meaning and relevance. Thus, after considering the facts, we are of the view that the order passed by the ld. PCIT is unsustainable. AO had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course of his assessment work. Even ld. PCIT has not specified as to what type of enquiry ought to have been made by the A.O. which would have resulted into income or disallowance or any other adverse action, therefore, in such circumstances, the order passed by the A.O. cannot be branded as erroneous and prejudicial to the interest of revenue, therefore, we set aside and quash the order passed u/s 263 of the Act. - Decided in favour of assessee. - ITA No. 24/JODH/2021 - - - Dated:- 7-10-2021 - Hon ble Sh. Sandeep Gosain, Judicial Member And Hon ble Sh. Vikram Singh Yadav, Accountant Member For the Assessee : Shri Manish Surana, CA For the Revenue : Smt. Sanchita Kumar, CIT-DR ORDER PER: SANDEEP GOSAIN, J.M. The present appeal has been filed by the assessee against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before the Bench and the same is reproduced below: Issue/Point 1: The Surrendered amount was declared by the assessee as his business income and the capital was increased accordingly by this amount instead of reducing debtors or creditors from it. AO accepted the claim of the assessee without proper verification and examination of records. The allegation of PCIT is unfounded since it is factually incorrect. Your kind attention is drawn to audit financial Statements available on record. On perusal it would be found that by virtue of surrendered amount the capital has not increased directly. In place the surrendered amount formed part of the credit side of the Profit Loss account and consequently the profit for the year was increased by corresponding amount of ₹ 1.15 Crore. On the contrary in the capital account which is also available on record, your honour find that there is no such credit entry of ₹ 1.15 Crore. Thus Capital Account was not directly impacted by amount surrendered. The proposition of Id PCIT calling for reduction in debtors or creditors from surrendered amount is beyond comprehension. The assessee is a Civil Contractor and the awarders happ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agarwal HUF did not charge any interest on this loan from you. The AO id directed to examine and verify the creditworthiness of the creditor namely Virendra Agarwal HUF and genuineness of Transaction. The ITR, Confirmation, Bank Statement of Sh. Virendra Agarwal HUF is available on record. The same was duly examined and verified by the Ld AO. From the perusal of bank statement it is obvious that the immediate source of money given to the asseesee as unsecured loan was the proceeds realized from the FDRs. The money received from FDRs constituted the source of unsecured loan given to the assesse. The Ld PCIT doubted that the creditworthiness of the cash creditor in light of paltry return of Income showing income of 94,426. It is not the present income but it is the accumulated savings of the past years invested in the form of FDR became the source to the assessee. There is also ITR of Shri Virendra Agarwal(Individual) is on record. He has shown an income of ₹ 31.50 Lacs in his return of income. Therefore, in the light of the entire nitty gritty of the case, the allegation of Mr. Virendra Agarwal not having the credit worthiness is baseless and unfounded. Hence the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f them in the bank account of their respective proprietorship concern. Therefore, the nomenclature in the narration was same. From the Bank Statement it is obvious that the immediate source of unsecured loan of Rs, 10 lakhs Rekha Verma was the money received by her from M/s Jaishree Products 09.05.2015 for ₹ 3 Lacs 11.05.2015 for ₹ 7 Lacs through account payee cheque. The current income didn't constitute the source of unsecured loan, hence the comparison of current income which the amount of unsecured loan does not have any meaning and relevance. It is therefore sincerely requested that the order passed by the Ld. Pr. CIT is illegal and may kindly be quashed. It is therefore sincerely requested that the impugned order passed by Pr. CIT u/s 263 of the Income Tax Act, 1961 may kindly be quashed and oblige. 5. On the other hand, the ld. CIT-DR has vehemently supported the order of the ld. PCIT. 6. We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. 8. In this context, we have analysed the documents placed on record and as per the ld. AR, during the course of proceedings, all the duly signed accounts statements, bank accounts, ITR and interest account of respective parties were duly furnished by the assessee and the same were also examined and verified by the AO and on examination of the records, it was found by the A.O. that there has not been any single amount of cash being deposited into the accounts of cash creditors. As per the assessee, it has also been proved that the money has come from the banking channel and the payers were regular assessee of Income Tax. In this way, the onus of identity and genuineness of cash creditors stand discharged by the assessee. It was submitted that the A.O. was satisfied after examination of the records that since there is no factum of cash being deposited immediately prior to the issue of cheque in favour of assessee, therefore, the source of money also stands established. Even otherwise, there was no obligation on the part of AO to inquire into the source of source of cash credit. After examining the entre records and after hearing the parties, we have also found that AO after h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences furnished, order u/s 143(3) of the Act was passed. On receipt of these objections, the Ld. Pr. CIT himself did not make any effort to prove any factual or legal infirmity in the documents or explanations furnished nor he was able to prove that any of the documents or evidences were false so as to establish that the AO's order was erroneous as well as prejudicial to the Revenue's interests because the view taken by him was unsustainable in law. On the contrary, the Ld. Pr. CIT merely set aside the assessment order directing AO to pass the order afresh in accordance with law which in our opinion was nothing but giving the AO second innings without establishing that the AO's order was erroneous as well as prejudicial to the interests of the Revenue. Our findings in this regard find support in the following judgments: DIT vs Jyoti Foundation reported in 357 ITR 388 (Del) ITO vs DG Housing Projects Ltd reported in 343 ITR 329 CIT vs Ashish Rajpal reported in 320 ITR 674 (Del) CIT vs Sunbeam Auto Ltd reported in 332 ITR 167 (Del) CIT vs R.K. Construction Co. reported in 313 ITR 65 (Guj) For these reasons, we are of the considered view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that Mr. Virendra Agarwal was not having the creditworthiness, is baseless and unfounded. Thus, in our view, the order passed by the ld PCIT is bad in law. 11. Now coming to issue/point No. 4, the ld. PCIT has alleged that TDS has not been deducted on the interest paid to the mentioned persons and without obtaining Form No. 15G/H, the A.O. should have disallowed the claim of interest expenses. 12. In this regard, after examining the documents placed on record as well as hearing of the parties, we found that From 15G and 15H were submitted on 28/04/2016 with the department. In this regard, the copy of the acknowledgement has also been placed on record, thus in this way, there was no liability to deduct TDS. Since, Form 15G/H are already available on record, therefore, no disallowance was made by AO on account of Non deduction of TDS. Apart from this, the Chartered Accountant in TAR has not pointed out any disallowance u/s 40(a)(ia) of Income Tax Act on account of Non deduction of TDS. Therefore, considering the totality of the facts, we are of the view that the order passed by the ld. PCIT on this issue is bad in law. 13. Issue/point No. 5: Ld. PCIT noticed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable. 15. After analyzing the totality of facts and circumstances and after evaluating the documents placed on record and the order passed by the A.O., we are of the view that A.O. had carried out all the necessary enquires and examined all the issues and had formed a possible view. It is also settled law that where two views are possible and the A.O. has taken one view, then in that eventuality, the assessment order cannot be treated as erroneous. In this regard, we draw strength from the decision of CIT Vs. Kwality Steel Suppliers Complex (2017) 395 ITR 1 (SC) wherein it has been held that: Where two views are possible and the AO has taken one view, the assessment order cannot be treated as erroneous or prejudicial to the interest of revenue. This is for the reason that while exercising the revisionary jurisdiction, the CIT is not sitting in appeal. In the instant case, the assessee firm was constituted with two partners viz., mother and son. It stood dissolved by the operation of law in view of the death of one of the partners, i.e. the mother but the business did not come to an end as the other partners, viz., son who inherited the share of the mother continued with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner records his view that the order is passed without making inquiries or verifications which should have been made, we cannot question such a view and we must uphold the validity of revision order, for the recording of that view alone, it would result in a situation that the Commissioner can de facto exercise unfettered powers to subject any order to revision proceedings. To exercise such a revision power, if that proposition is to be upheld, will mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner's view that the order is passed without making inquiries or verification which should have been made . Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-of a citizen. [L Hird ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. He need not look at everything with suspicion and investigate each and every claim made in the income tax return; a reasonable prima facie scrutiny of all the claims will be in order, and then take a call, in the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 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. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bona fide in a real-life situation. It is also important to bear in mind the fact that lack of bona fides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a co-ordinate bench of the Tribunal, in the case of Narayan Tata Rane v. ITO [2016] 70 taxmann.com 227 (Mum.) has observed as follows: 20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y inquiries were made or necessary verifications were done, no addition to income or disallowance of expenditure or any other adverse action would have been warranted. Clearly, in such cases, no prejudice is caused to the legitimate interests of the revenue. No interference will be, as such, justified in such a situation. That leaves us with the third possibility, and that is when the Commissioner is satisfied that the necessary inquiries are not made and necessary verifications are not done, and that, in the absence of this exercise by the Assessing Officer, a conclusive finding is not possible one way or the other. That is perhaps the situation in which, in our humble understanding, the Commissioner, in the exercise of his powers under section 263, can set aside an order, for lack of proper inquiry or verification, and ask the Assessing Officer to conduct such inquiries or verifications afresh. Thus, while applying the principles laid down in the case of Sir Dorabji Tata Trust Vs DCIT(E) (supra), it is evident that in the present case, the A.O. had made all necessary enquiries and verifications as can be expected of a prudent, judicious and responsible A.O. in normal course ..... X X X X Extracts X X X X X X X X Extracts X X X X
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